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Before getting into debt with a quick loan

I need fast money, what can we do?

When asking for quick money, it must be taken into account that the interest rates on consumer loans with terms between one and five years have not fallen by 9% during 2015, according to the information that credit institutions communicate to the Bank. of Spain: the interest rate of the 743 million euros granted to families in September of this year has averaged 9.57%.

What is this data for? It lets us know that, if the APR interest rate on personal loans is below 9.57%, we hire consumer finance that is cheaper than the average; if it is above, the financing is more expensive when asking for urgent money .

Quick credit for consumption

Quick credit for consumption

The most active financial institutions in the fast credit to the consumer offer, for certain amounts, terms and purposes, similar types or even cheaper than the bank in which we have domiciled the payroll. If we want to finance the reform of the home, for example, we can get 15,000 euros by paying a 6.86% APR, with real offers at this time. These financial institutions specializing in consumer credit do not open a current account to the customer, but instead deposit the monthly receipts in their current account.

But you have to be careful. When the need for financing is urgent and the basic purpose is to get liquidity, things change: for 1,000 euros to be repaid in 12 months, the rate of TAE becomes 24.51%, the same cost of financing a credit card . The difference with the immediate money of the available credit card is relevant: with the fast credit a payment commitment is assumed in a given term, with the card, no.

Let’s suppose that we need 1,000 euros to face unforeseen expenses, for example, changing the boiler that has definitely broken us. At this time of year it is not time to waste time and our bank puts us in trouble for a personal loan. So, we request these 1,000 euros from a “fast” personal credit institution and they grant it to us, to repay in 26 months. The monthly payment to be paid is 49.90 euros, which means paying 1,297 euros at the end of the personal loan (an interest rate of 24.51%).

If we have a credit card with enough available, we can decide to pay the expenses with it. To make it comfortable for us to pay back the money, we decided to establish a monthly fee of 20.08 euros -the minimum the bank allows us-. Taking the nominal interest rate of 24% of a credit card without changing the current bank, it turns out that these 20 euros mean amortizing the debt in 280 months, over 23 years. The reader has read well, 23 years to return the debt of 1,000 euros from the credit card. The total amount paid ends up being 5,600 euros of fast money.

The conclusion is that the bank of the personal credit card has cheated us? Not at all, at best we can complain that a nominal 24% is a very high interest, but it is the quick financing alternative that we have selected. The serious problem is not understanding how debt amortization works. If we pay only 20.08 euros per month, it turns out that the first year the initial monthly installments are broken down as follows: 20 euros of interest and 0.08 euros of amortization – the amount of what we amortize per month of the 1,000 euros requested.

Minimum fee that means returning the debt of the credit online in a reasonable time

Minimum fee that means returning the debt of the credit online in a reasonable time

There is another way of financing to obtain fast money much more expensive and whose legality moves in land with many gaps: mini-credits online on the spot, small amounts that are basically used to make ends meet at a given time, with maximum return periods that usually do not exceed 30 days. This money is offered by private financial companies, not supervised by the Bank of Spain, but by the Consumer Authorities of the Autonomous Communities. Its usefulness could have to do with preventing the bank from returning an important receipt and its cost, that of a kind of “discovered” granted by a private financial company.

Before getting into debt with a quick loan

The best way to not need money peremptorily is to have an annual and monthly budget of income and expenses, to accommodate the inflows and outflows of family money. A dynamic budget that you have to try to follow day by day. Unforeseen expenses, such as the boiler, and plurimesuales, such as home insurance, must be budgeted for a certain amount and divided by months. This amount is the minimum saving that every month we have to fight to get money fast.

If, despite the budget, we need financing, we should take it into account and plan ahead, since online personal loans are usually the cheapest financing tools, but they require time to compare the best of the moment and manage their concession.

If an unforeseen urgent expense arises and we have no other recourse than to assume interest rates higher than 20%, such as some quick loans and credit cards, we must plan your return in the minimum possible period of time. Understanding how the amortization system works is vital to avoid getting into debt in perpetuity. Fast money does not mean money at any price.