How to know if a personal loan is worth it
How to know if a personal loan is worth it!
Deciding whether to take out a personal loan is a choice that requires careful analysis, strategic planning, and a dose of financial self-awareness.
In a world where credit options are abundant but not always transparent, understanding the nuances of this decision can avoid pitfalls and open doors to smart financial solutions.
After all, a loan can be a powerful tool for achieving goals or overcoming unforeseen circumstances, but it can also become a burden if poorly planned.
In this article, we'll explore how to evaluate whether a personal loan is the best option, based on objective criteria, practical examples, a revealing statistic, and an analogy that illuminates the decision-making process.
Shall we dive in?
1. Understanding the purpose of the loan: need or desire?
Before making any decision, it's crucial to clarify your reason for seeking a personal loan. So, ask yourself: What is the real purpose of this money?
A loan can be a bridge to investments that generate returns, such as starting a business or acquiring professional training, but it can also be a trap if used to finance momentary desires, such as a luxury trip or the purchase of unnecessary items.
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Clarity about your objective is the first step in knowing whether a personal loan is worth it, as it determines whether the loan will be a catalyst for growth or a financial burden.
For example, consider Ana, a self-employed professional who wants to open a small sewing studio. She estimates she needs R$15,000 to purchase machines and materials.
A personal loan can be a wise choice, as long as you have a solid business plan, with revenue projections that cover the installments and generate a profit.
In this case, credit is an investment in the future. On the other hand, imagine John, who wants a R$10,000 loan to buy a high-end cell phone.
Without a plan to pay the installments, you can compromise your monthly income, accumulating unnecessary debt.
Thus, the distinction between need and want is crucial to avoid impulsive decisions.
Additionally, it is important to consider your personal financial context.
A study by the Central Bank of Brazil, carried out in 2023, revealed that 78% of Brazilians who took out personal loans in the last two years did not have a clear repayment plan, which resulted in default in 35% of the cases.
This statistic highlights the importance of aligning the purpose of the loan with the ability to repay.
Therefore, before signing any contract, evaluate whether the objective justifies the cost of the credit and whether it fits your financial reality.
2. Assessing your financial health: can you afford the installments?
Once you've defined your purpose, the next step to determine whether a personal loan is worth taking out is to analyze your financial health.
In other words, does your monthly income cover the installments without compromising essential expenses?
To do this, calculate your financial safety margin, that is, the percentage of income left over after paying fixed bills, such as rent, food, and transportation.
Experts recommend that loan payments not exceed 30% of net income, ensuring you maintain a reserve for contingencies.
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Consider the case of Mariana, who earns R$ 4,000 net per month and has fixed expenses of R$ 2,800.
There is R$ 1,200 left, which means she can allocate up to R$ 1,200 x 30% = R$ 360 to loan installments without compromising her stability.
If she opts for a loan of R$ 10,000 with interest of R2% per month, in 24 installments, the monthly amount would be around R$ 600, exceeding her capacity.
In this scenario, the loan isn't worth it unless she adjusts her budget or finds an option with lower interest rates.
This practical analysis avoids surprises and ensures that the credit is sustainable.
Additionally, it's essential to check your financial history. Financial institutions evaluate your credit score, which reflects your punctuality in previous payments.
A low score can result in higher interest rates, making the loan more expensive.
On the other hand, a good score can guarantee better conditions.
Therefore, before applying for credit, check your Serasa or SPC score and, if necessary, settle any outstanding debts.
This way, you increase your chances of obtaining a loan with affordable rates, aligned with your payment capacity.
3. Comparing costs: the real price of the loan
Knowing whether a personal loan is worth taking out requires a detailed analysis of the costs involved.
In addition to the amount borrowed, it is necessary to consider interest, administrative fees and the Total Effective Cost (CET), which includes all charges.
Often, a seemingly low interest rate hides additional costs, such as mandatory insurance or registration fees.
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Therefore, comparing offers from different institutions is a smart strategy to ensure that the loan is economically viable.
Think of the loan as an iceberg: the amount requested is just the visible tip, while the total costs are submerged.
For example, a R$20,000 loan with an interest rate of R$1.51 per month may seem attractive, but when you include the APR, the real cost could reach R$2.51 per month, significantly increasing the final value.
To illustrate, suppose Pedro takes out this loan for 36 months.
With a CET of 2.5%, he will pay around R$ 34,000 in the end, almost 70% more than the initial value.
Comparing the APR between banks and fintechs may reveal cheaper options, such as an offer with an APR of 1.8%, which would reduce the total cost.
Additionally, online tools, such as loan simulators, are valuable allies.
They allow you to estimate the impact of installments on the budget and compare conditions across different institutions.
However, beware of promises of “zero interest” or very advantageous conditions, which may hide tricks.
Always read the contract carefully and, if possible, consult a financial planner to validate your decision.
This ensures that the cost of the loan does not exceed the expected benefits.
4. Alternatives to borrowing: are there other options?
Before deciding whether a personal loan is worth it, explore alternatives that can meet your needs without creating debt.
For example, if the goal is to pay off a more expensive debt, such as a credit card revolving debt, a personal loan may be advantageous, as the interest rates are generally lower.
However, other options, such as negotiating discounts with lenders or selling non-essential assets, can avoid the need for credit.
This reflection is crucial to avoid unnecessary debt.
Imagine a scenario where Carla needs R$ 5,000 to cover a medical emergency.
Instead of immediately taking out a loan, she considers her options: selling an electronic device she no longer uses, such as an old television, or paying directly with the clinic in installments.
After negotiation, the clinic agreed to split the amount into six interest-free installments, eliminating the need for a loan.
This example shows how exploring alternatives can preserve financial health and avoid additional costs.
Additionally, building an emergency fund is a preventative strategy.
Even if you need a loan now, starting to save a small amount each month can help you avoid becoming dependent on credit in the future.
For example, saving R$ 100 per month for a year creates a reserve of R$ 1,200, enough to cover many unforeseen events.
So, when evaluating whether it's worth taking out a personal loan, consider whether there are alternative ways that meet your needs with less financial impact.
Frequently asked questions about whether it's worth taking out a personal loan
To further clarify how to know if it's worth taking out a personal loan, we've compiled the most frequently asked questions into a handy table.
These answers help you make informed decisions and avoid common pitfalls.
| Question | Response |
|---|---|
| What impact does a loan have on my credit score? | A well-managed loan, with on-time payments, can improve your score. However, late payments or defaults reduce your score, making it more difficult to obtain new credit. |
| Can I pay off the loan early? | Yes, most contracts allow for early settlement, often with a discount on interest. Check the terms and conditions in your contract to avoid surprises. |
| Are online loans reliable? | Yes, as long as they're offered by institutions regulated by the Central Bank. Research the company's reputation and avoid suspicious links. |
| How to choose between long and short terms? | Longer terms reduce installments but increase total interest. Shorter terms have larger installments but cost less in the end. Consider your income to decide. |
| What happens if I'm late on a payment? | Late payments result in additional fines and interest, in addition to negatively impacting your credit score. Contact the institution to renegotiate if necessary. |
Analogy: borrowing as a tool
Think of a personal loan as a wrench in a toolbox.
When used correctly, it tightens the right screw, fixing the problem effortlessly.
However, if applied carelessly, it can damage the piece or even hurt the person using it.
Likewise, a well-planned loan can improve your financial situation, solving a specific need or boosting a project.
However, without care, it can tighten the budget too much, causing an imbalance.
So why not choose the right tool for the job and use it with precision?
This analogy highlights the importance of using credit with purpose and planning.
Just as you wouldn't use a wrench to hammer a nail, don't apply for a loan without evaluating whether it's the best solution.
Consider the size of the “screw” (the financial need) and the strength required (your ability to pay).
This way, the loan becomes a practical solution, not a problem.
In short, knowing whether a personal loan is worth it requires a multifaceted analysis: understanding the purpose, assessing financial health, comparing costs, exploring alternatives, and clarifying doubts.
With planning and information, you transform credit into a tool for growth, not an obstacle.
Therefore, before signing any contract, take time to reflect: Is this loan the path to a solution or the beginning of a new challenge?
