When you need credit , you can go first to your parents, partner, or close friends, because you know that the amount you borrow will have no interest or the rate charged will be lower than that charged by banks. But when has no one to turn to but the bank?
Credit? Keep an eye on Total Effective Cost!
Generally, when you apply for credit from the bank where your account is registered, the institution first shows you the interest rate, saving the Total Effective Cost only for when you confirm the contract and the payment installments. Always be aware that Total Effective Cost is the sum of interest rate, IOF and transaction charges. Still don’t know how Total Effective Cost works? Click here to learn more.
The overdraft that leaves you in the red
When you open a checking account with the bank, the first line of credit offered by the bank is overdraft. At any time, when you need money, just use your bank card. There is no need to request a limit as it is usually already released.
On the other hand, the major disadvantage of using overdraft is the high Total Effective Cost . With high interest rates, it is easy to lose control over debt, resulting in debt. The consequence, from default, may be the cancellation of the banking service until the property of the person is taken.
The Danger of Credit Card Revolvers
The second line of credit offered by the bank is the credit card. This mode is the most dangerous on the market, why? The amount you spent the previous month and could not pay will come to the next invoice with interest added. Be careful when choosing not to pay any amount on your bill, as the revolving credit interest rate (learn more here) in Brazil is one of the highest, over 449% per annum! If you cannot repay this debt soon, it will become a snowball out of control.
Looking for personal loan? Deburden yourself! Who says your bank really has the best deal for your pocket? With the internet, financial companies are increasingly incorporating technology into their operations. Companies such as these offer solutions to customers underserved by financial institutions, such as the credit card offered by Lubank, which gives customers the option to apply for a credit card without being connected to a bank. Fundico is another example! The personal loan platform follows the unsecured personal credit line for individuals. Total Effective Cost may range from 2.79% to 5.26% per month, depending on customer analysis and installment option.