Bad Debt: How to Avoid?

The current economic situation in Brazil and the rise in interest rates on personal loans, overdrafts and revolving credit cards have contributed to the growth of default in Brazil. According to Serasa Experian in June 2016, the state of Sao Paulo accounts for 30% of all national defaults and 60% to 70% of the Southeast region. After all, how can we avoid being delinquent?

List all currently existing debts

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The first step is very important. Make a survey of all existing debts in your name. It is important to include in this list the financing, loans, credit card statement and even the overdraft you are using.

Sort all debts in payment priority

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After listing all debts, it is time to check which debts should be paid urgently. In order to sort them out, there are a few tips to identify which debts should be paid first:

1. Debt Amount & Interest Rate

It is important to see the combination of the debt amount and its interest rate. If you have a debt of $ 10,000 with a monthly interest rate of 10% and a debt of $ 2,000 with a monthly interest rate of 5%, you should prioritize the first debt.

2. Debt resulting in restriction

It is important to check the nature of each debt you own and identify if any of them could lead to name restriction, ie popularly called a “dirty name”. If you fall into this situation, it may be more complicated than you think, as this restriction even affects credit lines in the market. It will be very difficult to get a good credit. Thus, debts with the characteristic that can result in rapid restriction of your name must be paid urgently.

Negotiate debts within your ability to pay

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If you already have the debt list with the priority order, it’s time to start negotiating them. The most important point is to negotiate so that all debts fit into your pocket, so that you can pay back all installments periodically, without any delays. Remember that defaulting on repayment of negotiated debts can further complicate your situation. So be careful not to stop paying them.

Expense Savings + Increasing Income is a Good Exit

An important note is that to get out of default quickly, not only save money by cutting your expenses, but also look for an extra source of income. This combination will get you out of default quickly.

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