How to use personal loans wisely and avoid unnecessary debt?

Today we’re going to talk about a topic that arouses both interest and insecurity: personal loans.

Let anyone who has never needed or thought about applying for a loan cast the first stone!

But how can we use personal loans wisely and avoid falling into the trap of unnecessary debt?
Let’s unravel this mystery together!

How can you use a personal loan wisely and avoid unnecessary debt?

Assess your financial needs and plan ahead

Before applying for a loan, it’s essential to make a detailed analysis of your financial needs.

List your expenses, your income and establish what your priorities are. A personal loan is only recommended if it is really necessary and if it is the best option available.

In addition, make a financial plan, set goals and deadlines for paying off your loan and stick to your plan to the letter. This will prevent you from taking on unnecessary debt and help keep your finances in order.

Research and compare interest rates

The loan market is vast and full of options. Therefore, before signing any contract, research the interest rates offered by various financial institutions and compare them.

Remember that even a small difference in rates can make a big difference to the final amount you pay.

Pay attention to the Total Effective Cost (CET)

In addition to interest rates, it’s important to check the Total Effective Cost (CET) of the loan.

The CET includes all the costs involved in the operation, such as fees, taxes and insurance.

By comparing the CET of different loans, you’ll have a clearer picture of which option is really the most advantageous for you.

Read the contract carefully

We know that contracts can be boring and full of technical terms, but it’s essential to read them carefully before signing.

Check all the clauses, conditions and possible penalties in the event of late payment. If there’s anything you don’t understand, don’t hesitate to clarify your doubts with the financial institution.

Take out a conscious loan

If you’ve decided that a personal loan is the best option for you, do it consciously.

Avoid committing more than 30% of your monthly income to paying the installments, as this can lead to debt and undesirable consequences.

Also, don’t use the loan money for superfluous purposes or excessive consumerism.

Prioritize the payment of installments

When taking out a personal loan, it is crucial to prioritize the payment of the installments. Delays and defaults can lead to fines, interest and even to your name being blacklisted.

So get organized and focus on paying your installments on time. If necessary, keep track of the due dates and set reminders so you don’t forget.

Negotiate in the event of financial difficulties

In short, if for any reason you have trouble paying your loan installments, don’t let the situation get worse.

Contact the financial institution and negotiate new payment terms. You may be able to renegotiate the amount of the installments or even the payment period.