There are many reasons that can encourage a person to ask for credit portability.
The question is: is it worth asking for and taking your debt, made with one financial institution, to another?
In general, it can be a good way to exchange the current debt – which has very high fines and interest rates, for example – for a debt with more attractive rates. And that can translate into less spending for you in the long run.
Planning is more than fundamental to consider the positive impact that credit portability can bring to your routine. So in this post we are going to talk about everything you need to know about the subject. Check it out soon!
What is credit portability?
In a nutshell, credit portability is the flexibility that people have found to take the terms of their loan with one institution to another company.
A simple transfer of creditors, therefore, but which can bring benefits if the new location has better payment terms.
Credit portability is even a consumer right. As much as the current institution with which you owe a debt tries to convince you otherwise, you can request a change at any time. Not for nothing, many UK citizens are indebted and see this pending increase gradually because they do not have this information well clarified.
When was it created?
Credit portability was created in 2013 and is authored by the Central Bank. The basic idea was to make financial institutions more competitive in the market, which also turns into advantageous proposals for the consumer.
How does credit portability work?
Anyone interested in this service should contact the financial institution with which the debt is outstanding and request a statement of the outstanding balance. The deadline for calculating this amount is one business day – if it is not respected, you can complain to the Ombudsman of the institution or the
It is important that this document contains some data:
- the contract number;
- the updated borrowing amount;
- the statement of the debit balance in its evolution;
- the type of credit granted;
- the current annual interest rate – both nominal and effective;
- the value of each installment of the credit;
- the total term of the agreement and also the remainder.
Then, you take that information to the place where you want to request credit portability according to your interests. If the credit is approved, the debt is paid by the new institution and takes over the terms of the new loan.
When is it allowed to request credit portability?
Individuals can request portability of credit according to some specific lines of credit, such as:
- credit card;
- real estate credit;
- personal credit;
- payroll loans;
- vehicle financing.
The overdraft also has one of the highest rates in the financial market. To learn more about it and learn how to avoid it, see our full post on the subject!
It should also be noted that credit portability can only be demanded by the consumer if at least a portion of the contract has been paid off. The average varies between financial institutions, but it is around 15% and 20% of the total installments of the contract signed.
Another point of attention: debt transfer is usually free – with the exception of some lines of credit, such as real estate -, but it is always important to check if there is a charge for fees, such as the registration of the new loan. Have everything duly clarified so as not to have unpleasant surprises.
What are the advantages of carrying out credit portability?
The biggest advantage has already been clarified: with credit portability, you can replace high interest rates with a loan that has more attractive rates – thus reducing the final amount of the requested credit.
But, precisely because it is a consumer right, the service can be requested for other reasons. Let's say, for example, that the care of the current institution is rude or even difficult to deal with.
However, there are more benefits to this practice. And one of them is the ease with which you can transfer the debt to another bank, for example, without having to open a bank account at the new institution. Something that adds even more flexibility to the consumer.
When is it not worth asking for portability?
Although it is a relatively quick and simple process (around 20 working days) to complete, portability is not always recommended to the consumer. Some situations in which this occurs:
- when the contract is nearing its end. Sometimes, the very debt negotiation with the current institution it may be more affordable;
- when the rates practiced between the institutions are basically the same, not influencing the change in values with the transfer of the debt.
So, just keep an eye on the conditions that each establishment offers to ensure that credit portability will be a truly attractive solution for you.
How to organize yourself financially?
So, you found an institution whose payment terms are more attractive and requested credit portability. Great news!
This is where the tips that we will list below come in, ensuring that you leave the chaotic financial situation and embrace a more controlled and economically secure routine.
Calculate the total value of your accounts
Sit down with everyday accounts and bank statements for the past few months. Calculate how much you spend monthly, on average, and know in advance what are your fixed expenses (such as condominium / rent, water and electricity, etc.) and variables (such as transportation / fuel and leisure, among others).
Here, it is also important to select any installments or outstanding debt that you have. Include them in expenses so that you can discipline yourself to honor their payment to the letter.
Then, analyze your monthly income. Are expenses compatible with earnings? If not, it's time to understand where consumption can – and should – be controlled so that you don’t finish another month in the red.
It is a more bureaucratic and slow work, but of great relevance to guarantee a relief in the accounts.
We have already suggested this tip before, but it is worth reinforcing it for other situations as well. If you have other debts, try renegotiating them. This can add advantageous conditions, such as extension of term or even a more pleasant rate according to your financial reality.
In the worst case, the institution will refuse your request. At best, the request is accepted. In general, the middle ground opens a negotiation in which you must know, in advance, how much you can and intend to spend to avoid the accumulation of debts.
Set financial goals
Another important tip, which serves both to settle accounts and to keep them in order, is the creation of financial goals. Say, for example, that you want to buy a car.
Put the price as your goal, set up a budget in which you can save a buck (and also cut unnecessary expenses) monthly. This allows you to have a deadline in mind.
Remember that it can be a short, medium and long term goal. The important thing is to build financial discipline with this decision to follow it to the letter and ensure that you follow it with the accounts up to date. In addition, of course, to generate more motivation to save, to avoid costly new loans and to reach the need to apply for credit portability.
So, is it worth making the credit portability?
Overall, we believe that credit portability is an attractive alternative for consumers. As long as it makes sense to opt for this alternative.
As we discussed, it is essential that a reason for this is identified, such as the final value less than that calculated with the current contract. The unsatisfactory service of the institution can also be the stimulus you need, since the good relationship between both is very important.
However, take the time to make your decision as assertive as possible. Research a lot, make comparisons of prices and companies that do credit portability and always keep in mind what are the financial limits that your current condition allows.
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