On Friday of the previous week, a few hours after the board of directors of the Banco de la República, by majority vote, made the decision to raise its interest rate, which sets the course of the cost of credit in colombiaup to 12.75 percent, the Financial Superintendence announced the limit to which money could be lent in the country without incurring in the so-called crime of usury.
(Read also: Find out how to avoid debts from making your life miserable in a year with difficulties)
The news was not encouraging at all, especially for those who among their planes are taking a loan, since the interest certified by the market authority was 45.27 percent effective per year, the highest recorded so far this century. Only a similar rate (46.71 percent) was seen in May 1999, when the country was going through one of the most acute financial and economic crises in its history.
And while in the Issuer, the Government and some sectors welcome the fact that the other market rates are adjusting (some have risen more than 14 percentage points) with a view to slowing down the economy, the growth of consumer debt, and by this same way, Contain the escalation of inflationwhich in January marked 13.25 percent, according to Dane, frequent users of credit cards and consumer loans, among others, lament because today taking on a debt with the bank costs them almost twice as much as a year ago.
The situation today is much more complex than a year ago, especially if the option to face the beginning of the year is to go into debt. And it is not for less, unless you require bank resources to start a business, for which you can find rates between 18 and 20 percent effective per year on average, which are not low either, take credit to finance basic expenses or attend to some contingencies of the moment, you will have to prepare to pay, on average, 14.5 percentage points more for a consumer loan than a year ago.
(Also read: Financial inclusion touches 92% of adults in Colombia)
road to the limit
According to the records of the Banco de la República, the average rate at which consumer financial entities were lending until the end of the second week of January was 31.79 percent effective per year, much higher than the 17.27 percent hundred of a year ago.
But be careful, these averages do not include what you will have to pay if you are thinking of using your credit card to meet these needs or the recent adjustment in the reference rates that the Issuer has just made and that will make the cost of credit in Colombia even more expensive this year.
In credit cards for natural persons, according to the most recent information from the Financial Superintendence, the average rate is close to 33 percent effective per year, but this does not include cash advancesfor which the average interest currently applied is close to 35 percent effective per year.
The problem is that some entities are already beginning to approach the permitted limit of 45.27 percent, especially for the use of credit cards. Some entities are already charging cardholders fees of more than 42 percent effective per year.
In banks like Serfinanza the card marks a rate of 42.68 and 42.41 percent, depending on who does it, a man or a woman, respectively. In Bancoomeva of 42.02 and 40.64 percent; in the GNB Sudameris 41.51 and 41.6 percent; in Finandina, 41.16 and 40.74 percent, to mention just a few examples of the information reported by the entities up to January 27 to the Superfinanciera.
However, when taking out a loan, it must be taken into account that the interest rate used by the bank depends on the person’s credit ratingwhich measures the level of default risk, the term to which the credit will be taken and the requested amount, of course.
(Also read: Banco de la República completes its 12th rate hike and takes it to 12.75%)
tight finances
According to the most recent ‘Consumer Pulse’, prepared by the TransUnion risk center, three out of 10 respondents indicated that their household income had decreased, four percentage points more than in the third quarter of 2022. In addition, 36 percent I said that the economic situation of your household was worse than expectedcompared to 28 percent in the previous quarter.
The same report allowed 32 percent of consumers to say they could not pay at least one of their current obligations in full, four percentage points more than in the third quarter of 2022, while 27 percent expect to pay at least a partial amount. Another 26 percent plan to refinance or renegotiate their payments.
Under these circumstances, personal finance experts and market authorities themselves are recommending not taking on new debt this year unless strictly necessary, due to high interest rates and the slowdown in the economy, which may affect employment.
Before going to a new recommended loan make a judicious assessment of the level of indebtedness you have, as well as disposable income. There are three alternatives that also deserve a detailed study to make the best possible decision that allows you to face a year that does not look entirely healthy from an economic point of view: prepay the debts you have, refinance them or sell them to another entity that offers better conditions of rates, terms and payments, which can alleviate the cash flow.
Héctor Juliao, Managing Director of Corporate Banking at Credicorp Capital, points out that in times of crisis it is often believed that the best thing to do is pay off debts so as not to have to have money on a monthly basis that, in theory, can be used to meet other obligations.
“The first thing that must be taken into account when making this type of decision is to review the current characteristics of the credits that you have, so that you can analyze with high can stay, high to renegotiate and high it is better to settle in a way anticipated ”.
He points out that it is important to review the conditions of the credits, mainly the rates at which they were agreed, to know that they are tied to higher ratesif they are fixed or variable rates, because in a situation like the current one of inflation and rising rates, this factor is key.
If the alternative is to refinance a current loan, review in detail the new conditions in which this agreement is agreed with the entity, since the important thing is to achieve benefits in terms of the cost of credit (rate) that allow you to improve your cash flow.
And if the alternative is to sell the portfolio to another entity, it is also necessary that it be in conditions of interest rates and terms that allow you to get a sigh in your monthly finances.
ECONOMY AND BUSINESS
