Are you thinking about taking out a personal loan? But do you really know everything about this financing?
Personal loan is a financing used to allow its holder to purchase goods and services, without needing to specify their use. This particularity means that this credit is often requested by people in urgent situations, who find themselves without money to make certain payments and end up taking out a loan to cover these costs.
However, there is a lot of misinformation, and so today we are going to clarify the advantages and disadvantages of this type of loan, so that you are well informed and can make an informed decision!
What are the advantages?
Personal loan is a quick approval financing, which allows you to solve more urgent problems or respond to unexpected situations.
Besides, this credit offers very flexible payment terms and also, depending on the banking institution that grants the loan, the amount can be increased later.
Still on the advantages, when we talk about applying for a personal loan we are talking about little to no bureaucracy, when we compare it to a house loan, for example, with even the possibility to work it all remotely..
However, not everything is positive and it's necessary to evaluate both sides of the scale and also understand the disadvantages of this type of credit.
And the disadvantages?
When talking about a personal loan, interest rates tend to be generally higher than other types of credit, resulting in the final amount owed being much higher than the amount borrowed.
Furthermore, as this credit is easy to grant, if you are not careful and do things conscientiously, you have serious risk of getting into debt and in these cases, the penalties for non-compliance are usually quite high!
Last but not least, you should consider that there is a possibility that you will be charged extraordinary fees such as opening credit or insurance, amounts that can increase the final value of the loan.
Can this type of loan be refused?
Despite everything, the number of individuals and families using personal credit is increasing, as it helps them realize their dreams and life projects.
However, there are some situations in which the loan requirement can be refused. First of all, you need to understand how financial institutions will or will not grant a certain loan or what reasons led to your request being refused:
- If your name is on Banco de Portugal's "black list"
It's important to confirm if your name is included in the Credit Responsibility Center. This is the list of all people who have financial defaults, so if your name is on the list, no bank will approve your credit application;
- If your effort rate is too high
Before requiring a credit, make a effort rate simulation. If this value is higher than 30%, it's likely that the credit application will be refused as it means that you may not have the security and financial stability to make payments;
- If you presented incorrect data
Please make sure that all the information you provide is correct. Outdated data can lead to credit disapproval without anyone realizing that the problem is in the data sent;
- If you don't have a stable professional situation
The lack of an open-ended employment contract or professional instability can compromise credit approval as it does not give banking institutions the security they need to grant you credit.
Now that you have much of the information on your side, you can think better about the subject. If you need help doing a simulation, just contact us that we will find the best solution for you!