One of the main sources of anxiety for individuals is debt. Is it worth taking out a loan to pay off debts in order to regain peace (and sleep)? Then you're in the right place. Here, you can find out when it's wise to take out a loan while avoiding exorbitant interest rates.

When does it make sense to take out a loan to pay off debts?

Yes, it's always advantageous to take out a loan to pay off debts. For those in need, exchanging many expensive debts, such as overdrafts or credit card debt, which have the highest interest rates on the market, for a single debt obtained through a low-interest loan is a great deal. Clean up your identity, recover your credit and sleep soundly.

When the accounts don't close, fear and misinformation about loans can encourage people in debt to make bad decisions. When a person is in debt and often discouraged, their first inclination is to get rid of their belongings, such as cars and houses. But is this really the best option?

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Applying for a loan from a reputable organisation with caution can be the best option in this situation. Before signing a contract, you should read it carefully, ask questions and resolve all your concerns.

What steps should you take before taking out a loan?

Anyone who has never thought "I need money immediately to pay my bills" and taken the first alternative that came along should throw the first stone, but you need to be careful when taking out a loan to pay off debts. Check it out:

Effective rate and nominal interest rate:

Before contemplating taking out a loan, it is essential to look at the effective interest rate. This is the actual rate described in the contract. Due to its low value, the minimum charge is often used as a means of attracting customers. It is therefore vital to monitor the effective rate.

The costs that make up the CET can vary according to the institution and even the nature of the relationship between the parties. See below for a list of costs covered by the CET:

• Interest rates;
• Credit assessment rates;
• Tac - Registration Opening Fee;
• General insurance administrative costs;
• General rates;
• Taxes in general IOF (Tax on Financial Transactions).

It is therefore vital to evaluate the entire contract, not just the price claimed.

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The value of the instalment is not a parameter:

Never take out a loan based solely on your ability to make monthly payments. To get the total amount due at the end of the loan, multiply the monthly payment by the number of months remaining on the contract.

This account allows the consumer to determine whether the applicable costs are excessive or whether they are really getting a decent deal.

Evaluate the financial institution:

Historically, only conventional banks granted loans to customers. Today, a variety of institutions can provide reliable credit to individuals. Fintechs, digital banks and credit unions are some of the newest entrants to the market.

It is therefore essential to investigate the financial institution from which you will be applying for a loan to determine its position in the market. This review can be helped by sites such as Reclame Aqui and Procon.

Beware of fraud:

Applying for a loan online is safe, as long as you take precautions. As well as investigating the institution, look for other indicators that the institution and the loan are trustworthy.

Be aware that transactions are often encrypted and there are data security safeguards in place to protect your transaction. Even so, suspicious emails or communications should be avoided. Before carrying out the recommended actions, call and check the validity of the communication if necessary.

In order for the requested amount to be issued, you must provide your information to the institutions so that they can analyse your credit history. Companies that don't carry out this verification procedure or request information from the client can be harmful.

The Central Bank's policy prohibits charging upfront fees. Therefore, legitimate institutions do not seek to do so. Remember that all organisations offering personal loans must be registered as legal entities.

Is it worth taking out a payroll loan?

Any type of credit is acceptable, as long as the consumer understands how to use the loan according to their specific needs.

Payroll loans are a type of personal credit granted to workers (with a public or private employment contract with a company) and beneficiaries of the INSS.

How to apply for an Itaú payroll loan: How to apply!

By using the employee's income as a guarantee of payment, this loan has the lowest interest rates on the market, making it an intriguing alternative for those considering whether or not to take out a debt consolidation loan.