Financing, consortium and loan: understand the differences

Knowing the differences between financing, consortium and loan is a must for anyone seeking credit. The medium and long term commitment impacts your budget and your quality of life. In addition, it can instead become your dreams, become a nightmare. Therefore, it is very important that you know the options you have, understanding what their differences are and being careful not to choose the most expensive one.

Find out now the features of three types of credit and choose the one that is most economical and best for your pocket!


What makes one debt more expensive than another?

What makes one debt more expensive than another?

When it comes to “expensive debt,” a lot of people think first of the full amount. This idea is totally wrong. What makes one credit option more expensive than another is interest. Interest is, simply speaking, the price you pay for money. If you close a deal with the bank – like a loan – it charges a difference. High interest rate transactions are the most difficult to pay. Take, for example, the credit card: If you do not fully pay an invoice, the other month you must pay the difference.

This outstanding balance increases at one of the highest interest rates on the market. To give you an idea, this figure can exceed 800% per year. You didn’t read it and we didn’t write it wrong. If you fail to pay an invoice of $ 500 in one year, your debt will be greater than $ 4,000.

That’s why card debt causes that snowball effect so much – the longer it goes, the harder it gets to pay off.


Why are there interest differences?


The lender wants to get back, right? That’s why banks and lenders are asking for extra resources to make sure the customer honors their commitment. Examples are:

  • endorsement by third parties (guarantors)
  • payroll discount
  • alienation of vehicle or property.

Real guarantees are assets, which may be taken from the defaulting customer by judicial means. Among loans and financing, they offer the lowest interest rates.

The more uncertain the guarantee, the higher the interest rate set by the bank.


What are the differences between financing, consortium and loan?

money loan

To begin with, let’s clarify that the consortium is not “borrowed money”. It is your own resource. Along with that of other consortium members, he builds a fund that allows credit to participants in a group. This is a form of collaborative and conscious consumption – we will soon see why.

That said, let’s differentiate each type of credit:




It is one that is granted by the financial institution for a specific purpose. You finance a property or a vehicle, for example. For this to happen, the bank advises this asset and requires it to be collateralised for the entire payment period. You can use it normally, if it were already yours – but in fact, it is not. In the good document, the fiduciary sale is recorded, which is a kind of bond with the bank.

It would be like having the following message: “This is good tied to the bank and can’t be sold, traded or transferred” – these are not the exact words, ok? Therefore, until you repay the entire outstanding balance, you cannot exchange the financing object for another.

Check out some examples of fees taken from the Safely Bank website:

  • real estate financing: between 11.50% and 20.98% per year
  • vehicle leasing: between 15.60% and 28.99% per year.

Remember that in consortia and financing banks charge fees such as the Credit Opening Fee (TAC), property valuation fee and the Financial Operations Tax (IOF), which also make credit more expensive.




The main difference of the loan is its end. When you borrow money from a bank, you do not need to know the destination. You can spend it as you please! Also, if you already have a relationship with that institution, you can reduce bureaucracy. But this facility is often expensive: loan interest rates are quite high and can be almost as difficult to pay off as overdraft and credit card debt.

Depending on the warranty, this cost will vary slightly. Payroll loans, for example, give the bank more security, the installments are debited from the payroll. But they are only available to INSS withdrawals and pensioners, civil servants and employees of companies affiliated with the bank.

It turns out that even then the rates are a bit salty. Here are some examples (according to Safely Bank information):

  • unsecured personal loans: from 9.80% to 966.72% per year
  • INSS payroll-deductible loans: from 22.35% to 35.98% per year
  • payroll-deductible loans to civil servants: from 18.83% to 85.95% per year
  • payroll-deductible loans to private employees: from 16.18% to 89.74% per year.




The consortium is a programmed purchase modality. Didactically, we can say that this is a financial modality in which a group of people (physical and / or legal) come together to form a fund in order to acquire goods of the same nature. This fund will be managed by a company, which will be responsible for managing the amounts and contemplating the letter of credit at the regular meetings.

Since you are not borrowing money, the consortium has no interest. The main rates of a consortium are usually divided into four different types of payments, namely:

  • the common fund
  • the administration fee
  • the reserve fund
  • the safe

The common fund is the amount that every consortium member pays to form a fund for the acquisition of a good, which will serve to make up the balance for the monthly contemplations. The monthly contribution from the common fund is obtained by a percentage (%) of the value of the contracted credit.

The administration fee is the amount charged to administer the consortium groups. We should not confuse it with the interest charged on the financing arrangements. The consortium administrator is free to set its percentage. Remember that the administrator must be authorized and accredited by the Safely Bank of Brazil . The reserve fund is intended to protect the operation of the group by covering possible defaults and other expenses related to the consortium members / groups, such as default collection costs.

Life insurance is a benefit to consortium members or heirs in the event of a claim.


How to choose the best option?

credit loan

The best option is always the cheapest one, isn’t it? Here’s some advice: Always try to have a lot of financial planning. Thus, you do not need to appeal to expensive credit options. Loan seekers usually need money urgently, so they are subject to high interest rates. If you save money and make plans for the future, you may well form a consortium and secure your assets without compromising financial stability.

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