A fast way to get into debt | The State
The fintech, financial on the network, are offering quick loans at rates that can be attractive./Archivo
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Jim WATSON / AFP / Getty Images
If you need to make a payment for which you have no money quickly, you will have no choice but to go into debt. Pay with the credit card and pay it little by little or look for a way out so fast but somewhat cheaper since the APR or interest rates of plastic money are around 20% and the cards have certain amount limits.
Some of the solutions such as going to the pawn shops or payday loans are even more expensive and involve risks such as losing the good that is pawned or staying in a spiral of debt.
Cash advances with the card are not cheaper either because you end up paying the commission of that operation and that of the ATM that is used. You need to have a pin and you have to be aware that, in addition, there are limits to the amounts that can be achieved with this method.
Asking for money from family and friends is an operation that has the advantage that it is usually much cheaper. But it carries the risk of losing or spoiling friendships or family relationships. Putting it in writing and agreeing on the terms of the return help a lot to clarify the accounts (and the affections) in case it is the most feasible.
The most attractive option is the unsecured personal loan, something that can be managed by phone or online.
These loans do not require endorsement or collateral, as is the case with those made against the home or car. By not having to do appraisal and other calculations they are usually granted very quickly. Now, both what you can borrow and the interest that is applied depends on a lot of who asks for it, the credit history and the debt-to-income ratio that you have.
By not having collateral, interest rates are usually higher than mortgages, since the lender assumes a great risk, but they are usually lower than those of credit cards if you have a good credit score. That is the reason why many people ask for them to settle debts with their card issuers at a better cost. The interest rate can be high and therefore not a big deal if the credit score is low or needs improvement. The APR includes loan closing costs that can vary from 1% to 7% of the loan.
If they are not paid, you run the risk of having to answer for it in court and having a very bad credit score for years (not advisable). Paying them in less time than stipulated helps with the credit score and paying them late is penalized as with the cards, something that you should try to avoid.
To get this type of loan, the most advisable thing is to go to the bank, credit union and especially call an online lender, called Fintech (financial companies on the network). It is convenient to ask for a budget from all of them to know the terms of the loan contract, the amount that each one decides to loan, the interest and the form and amount of monthly payment.
Which entity is better? It depends. Credit unions offer good interest rates but the paperwork ensures that it takes more than a couple of days to receive it. These entities usually work with their members.
Banks tend to be tougher, do a more intensive risk assessment process, and don’t always make these loans to non-clients.
Fintech companies are the ones that are offering the most these loans and in fact, although they retracted during the beginning of the pandemic, now many of them are beginning to send more offers by mail. Normally to pre-qualify they need customer information and on the same day an agreement can be reached so that the money can be in the account in just a couple of days.
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