Know the percentage of the interest rate of the loans that are requested. Take into account the terms and the currency with which you must pay. One-third of families with debt have troubled credit ratings. Taking out a loan is a beneficial tool to buy a home or a durable good, but it can become a headache if some aspects are not taken into account.
The Technical Advisory Commission of AEBU (banking union) released a report days ago on family debt taking data from the Central Bank (BCU). There he concluded that the 36% of all debtors belonging to the family sector do not enjoy “good financial health”. The percentage equals 690 thousand over-indebted people. He reported that loans to families represent 97% of the operations carried out in the financial system.
The report complemented that in general the youngest and the men have greater problems to comply with the payments stipulated in a loan and, consequently, they are the ones that are less qualified as payers.
What would be the recommendations so that families do not fall into that level of indebtedness?
The partner of Cibils Soto Consultores, Marcos Soto, clarified that often people tend to believe that debt has a negative connotation, but that is not true. On the contrary, it is often positive and necessary. “Be careful with demonizing indebtedness; It is a tool that individuals have at their fingertips to access certain goods or services that cannot be obtained at present, but can be paid for in the future”said to The Observer.
One recommendation is not to borrow for more than the useful life of the good or service. “You don’t go to the supermarket and buy the assortment in installments because next month you have to buy again”he explained.
Another example he mentioned was taking (and paying for) a trip. If the vacation includes a one-week trip, you should think about paying it in a maximum of 12 installments. But clearly the term could not be five years.
Other aspects to take into account are interest rates and know the conditions required by the lender. Attention should also be paid to the currency in which the loan is requested. “There is a lesson there that the 2002 crisis left behind. The debt should be matched to the currency of income,” he explained. In this case, if the salary is in pesos, it would be reasonable to take a loan in Indexed Units (UI). If, on the contrary, the remuneration is in dollars, a loan with the same currency should be chosen to avoid exchange rate mismatches.
The executive director of the Association of Private Banks (ABPU), Bárbara Mainzerlisted some recommendations to deal correctly with a loan.
“There is something very important and that often is not finished understand is what are the consequences that you face if the credits are not paid in a timely manner, because that is where all the problems begin“, he claimed.
He stressed that the person must assess what they are indebted for. “It is one thing to contract a debt to start a business or buy a house and another is to buy the fifteenth pair of shoes”, she indicated.
According to Mainzer, it is advisable to create a budget that details income and expenses. In that budget there are priority expenses such as rent, electricity, water, food and education. These expenses must include the amount of money to pay debts. “Ordering helps and a lot. It’s simple but not easy, because if it were easy there wouldn’t be so many problems,” she said.
“It is not just looking at the conditions of the loan, you have to understand the rates, know how much I ask for, how much I return and if I can pay the fee,” he added.
financial education
For Soto, financial education continues to be a great must in Uruguay and that, obviously, ends up limiting the range of decision-making. “Financial education is understanding the concept of interest rate, amortization, and the useful life of goods and services,” he said.
