One of the main standards that banks and financial organizations observe when issuing loans is to have a good reputation. However, it is also feasible to apply for a loan with a bad credit history. See more!

Anyone who has or has had a bad reputation knows how difficult it can be to obtain certain financial services. In order to assess whether or not to release the loan amount, for example, most banks analyze the CPF and information accessible on the market, such as debt history.

However, there are certain options available to those with "dirty names" who need money to deal with an emergency, manage an unexpected circumstance or pay for expenses that have exceeded their predetermined budget.

Find out more about the different types of loans for bad borrowers and how they operate below.

Read also: Caixa FGTS loan: Find out how to take out a loan and the conditions in 2022

Loans for the unemployed: How does it work?

The way a personal loan for people with bad credit works is the same as any other loan. In other words, the client receives the money in an account at the financial institution of their choice and is obliged to pay it back within a predetermined period, plus interest. If you prefer, you can apply for a personal loan online and stay at home.

However, because they have a higher risk profile, it is important to note that the collateral required (in the case of a secured loan), the amount of the loan allowed and the interest rates charged are usually a little different for this demographic.

Loan models for people with bad credit: What are they?

Microcredit, payroll loans, pledges and asset guarantees are the most common loan options mentioned for people with bad reputations. Find out more about them here:

Microcredit:

As the name suggests, microcredit is a small loan intended for formal and informal businesses that cannot obtain traditional loans or credits (mainly due to their "bad name"). Examples of formal entrepreneurs include legal companies or MEIs.

The National Bank for Economic and Social Development (BNDES) supervises microcredit and its regulations, although financial institutions throughout the country provide it.

With initial loans ranging from R$ 100 to R$ 800 for individuals, Nubank has already begun to participate in this area. You can do this to make history and work towards gradually raising your status. To see if this option is accessible to you, check your application.

Payroll loans:

A form of loan that is often easier to get is a payroll loan. It can be an excellent option for those with a bad reputation, as the cost of the installments is deducted from their salary or social security income.

The interest rate on a payroll loan is usually lower and therefore highly attractive. As the consumer doesn't have to physically make the payment and therefore doesn't have to wait, payroll loans present few risks for credit institutions. Payments are already reduced automatically each month.

Pledge:

Those who are having trouble paying their debts and have outstanding obligations often look for other solutions, such as seizing assets.

The Civil Code definition of the legal word "pledge" is that it refers to the sale of an asset as security for a debt. In other words, the debtor offers the creditor a material guarantee if there is an agreement of obligation to pay (such as a debt). This creditor is entitled to the pledged asset if the agreement is not fulfilled.

The lender assumes less risk when someone chooses to pledge an asset as collateral. This allows them to use cheaper interest rates and without consulting credit protection agencies. In other words, the pledge guarantees that those who are inactive or who cannot afford high interest rates will have access to more credit.

Assets as collateral:

When choosing this loan option, the borrower's house, apartment or business premises are used as collateral for the institution to release the funds. During the repayment period, the bank takes ownership of the property. But don't worry, you can still enjoy the house as normal, either by living there or renting it out. Simply put, you can't exchange it for another item until the loan is paid off.

In general, interest rates are around 1% per month (or 12% per year), and banks will lend up to 60% of the property's value.

With a secured auto loan, you borrow money and repay it over time with interest. The main difference is that while the car is being sold to the bank, you can still use it as normal. However, the car cannot be sold until the full amount of the loan has been repaid.

It is also important to note that there are situations in which the guarantee is the money that the individual leaves invested or stored in a bank and not something else.

Cautions when taking out a loan of this type

It is crucial to read the contract carefully and confirm that you can afford the loan payments. If you have a bad reputation, you should consider these 4 measures before choosing a loan.

Plan ahead:

Borrowing money without budgeting for the costs is like adding a new problem. Before looking for a loan, consider your ability to pay installments from your monthly income, as well as the loan's interest rate.

Don't make a hasty decision without doing any research:

Many people opt to take out a loan as soon as one is offered when things get tough. Do some research into the many types of loan you may be eligible for. Although all options have interest, some have cheaper rates, remember that.

Understand the loan conditions:

It is essential to pay close attention to all the loan conditions:

• What are the interest rates?
• How will the plots be manageable?
• What happens if payments are late?

It's important to bear in mind that every institution is obliged by law to allow customers to pay in advance and to provide proportional interest savings. To avoid losing control of payments in the future, it is essential that you understand this information.

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Check that the company is registered with the Central Bank:

The Central Bank of Brazil supervises and controls the financial system. This means that, in order to be recognized to do regular business within the country, an institution must comply with the rules established by the Central Bank.