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What to consider when applying for credit

May 29, 2020

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What to consider when applying for creditWhat to consider when applying for credit


Despite the fact that the independent workers of Mexico registered in the Mexican Social Security Institute (IMSS) you could request one Solidarity credit According to the word for 25,000 pesos, which is offered by the federal government as a measure to amortize the effects of unemployment due to Covid-19, according to the authorities, only 30% of the micro-entrepreneurs in question have applied for this loan from the IMSS.

“One of the reasons that could have hindered this initiative was that not all loan candidates have a regular account with the specified requirements, the amount does not resolve their urgency, and they do not have the payment guarantees in the terms and conditions for that amount, so they need to other credit options, ”said Sebastián Medrano, director of Coru.com

“The crisis increases the use of credit, but a critical risk is that there is no certainty that it will be able to respond to these loans in the short and medium term,” he adds.

Is it advisable to ask for a loan during the crisis?

Before doing so, analyze your financial situation for the next 6 months and consider other currently available options to gain liquidity or time to pay off your debt.

Keep in mind that your income may be uncertain from May onwards. So rearrange your budget according to new priorities and remember what debts and expenses you have.

If you think the scenario is difficult to maintain, you should negotiate options with your bank to pay the most expensive debt. And if you still can’t see it, you should consider credit options.

What to consider when applying for credit

  • Discuss 4 questions: 1) Do you really need it or have you exhausted other options? 2) Do you have or have financial stability to pay the loan plus interest? If you don’t have financial stability at this point, you probably won’t even approve a loan. 3) Do you use the credit to pay debts or to generate more money? and 4) do you have a good credit rating? Otherwise, you may not be able to get a very attractive sum.

  • Requirements: Depending on the type of credit you are applying for, you will most likely need to be an account holder and have a specific history or background in the use of financial products.

  • Terms and Conditions: The basic information you need to get is the interest rate and its application. That means: How much do you pay in total plus commissions and interest, how long and what happens if you fall behind for any reason or want to make payments.

  • Credit restrictions. Depending on the loan you requested or the company that issued it, there may be specifications for how the loan will be used, especially if it is a personal or business loan.

Some types of loan financing

Before deciding on the first loan option, you need to evaluate the various alternatives offered by the market and analyze the advantages and disadvantages. Some of the most common are:

  1. Bank loan. One of the most frequently requested loans is that granted by banking institutions.

  2. Business credit. It is what entrepreneurs and entrepreneurs can use to drive the growth of their project. However, the requirement is the same as for all other credits. This implies responsibilities and requirements that are generally related to the constitution and operation of the company.

  3. Government funds. This funding is provided by the government to provide incentives for a specific cause: for example, disasters, SME growth, etc. They are usually credits to the word by inscription in certain dates.

  4. Financial credits. Financial companies that lend are popular financial firms (Sofipos), multi-purpose finance companies (Sofomes) and cooperative savings and credit companies (Socaps).

  5. Internet or fintech credits. Sofipos and Sofomes companies use technology to provide better financial services to users who are more agile and comfortable. Fintech companies in Mexico are regulated and the user has the support of Condusef. These types of online loans tend to be more flexible in their requirements, especially for people who do not appear in the credit bureau but who perform online transactions daily and generate data that can be used to develop an alternative credit rating, either by paying for cellphone or Electricity, use social networks or shop online. These loans via the Internet also serve to build up a credit history, provided that the data and payment amounts are adhered to.

IMPORTANT: When requesting credit, keep in mind that you should never be asked in advance for money for procedures, prepayments, or credit management. For certain financial companies that grant loans, a commission is charged for opening the loan. However, this must be communicated to the customer from the start in addition to the commissions specified in the contract and will be calculated until the loan is formalized.