With a scenario in which interest rate increases are expected to continue, it is important that if a person decides to apply for a loan through a credit card, they evaluate from their payment capacity until commitment to pay the total debt. In a nutshell, in being a ‘totalero’.
The Bank of Mexico (Banxico) announced this Thursday its decision to increase the interest rate by 75 base points, with which the benchmark is located at 7.75 percent. This is also a historic decision, as it is the highest increase in 25 years of autonomy of the institution.
An increase in the interest rate has as its main effect increase the cost of money and, therefore, the credits that people take or even those who already have some automotive or mortgage financing.
Gabriela Aguirre, chief financial coach of the Coru platform, explained that this is a time to make a personal assessment of which are personal or family fixed income and expenses. Before buying something, he recommended, you have to focus on paying off the debts you have, especially if they are at high rates or with variable interest.
“Here it would be advisable to seek that the credit does not exceed our payment capacity; the other is to look for fixed rates that are competitive. In addition, if we are not ‘totaleros’ and pay only the minimum or a fraction between the payment so as not to generate interest and the minimum, this remainder will be impacted by this rate that is going to rise”, he warned.
And to all this, what is to be ‘totalero’?
Refers to those cardholders who meet with your entire monthly payment in case you have used your credit card. Thus, they avoid paying interest by only paying the minimum payment and they do not have debts the next month.
But, what happens if you already have a mortgage or car loan? Coru’s expert explained that it should review the contract to know how the rise in Banxico’s rate will impact. However, he suggested giving capital contributions to reduce the amount of interest that will be paid at the end of the financing.
“I invite you to really focus on capital payments as soon as possible and don’t wait to raise the money. It is better to make cuts, either every two months or every quarter, and move forward in the liquidation. If you wait, it can be more expensive”, he argued.
Aguirre urged that in this second half of the year, and with a scenario where the Banxico rate is expected to reach a historical maximum, Mexicans take as a purpose to liquidate all their debts and use credit intelligently.