The financial system in Colombia has developed multiple tools to involve young people in the world of credit. However, in reality, access for this segment of the population is not so easy, because they have little credit experience, which increases the risk as users, from the banks’ perspective.
However, it should not be ignored that access to credit for young people has increased. According to a report by DataCrédito, The first credit experience that people face, up to the age of 28, is the purchase of a cell phone. Secondly, they take out loans in commercial establishments, mainly to buy clothing. And the third link they reach is the banking sector.
To make this access easier, Compensar’s Financing and Partnerships Unit created a guide for young people. | Photo: Getty Images
To make this access easier, Compensar’s Financing and Partnerships Unit created a guide for young people, in which it includes 6 key points to knock on the door of the financial system and not fail in the attempt.
Even more so if, according to Carlos Andrés Rodríguez, spokesperson for that unit in Compensar, he points out that “Today there are different alternatives that allow greater inclusion of young people in the credit market. For example, compensation funds, mobile operators, chain stores, among others, have made the requirements and amounts for granting quotas or credits more flexible.”Here are their recommendations:
1. The purpose of the credit can be decisive
As with every beginning in life, it is important to go step by step. Young people should start with small loans, as these are the ones that will pave the way for lenders to have confidence in the user’s ability to pay. “Low-value loans play a crucial role in financial inclusion, because they allow for the construction of a solid credit history,” says Rodríguez.
Their initial recommendation is that resources be used to cover a specific need or to invest in the future, since, “Getting into debt is a responsibility that must be taken on have a clear purpose and a reward for those who take it on.” This is part of financial education, which is rarely emphasized in Colombia.
To go on vacation, buy a cell phone, buy clothes. That’s what young people borrow for. | Photo: Getty Images
2. Understand the terms so they don’t surprise you
There are many young people who end up entangled in loans that, in their eyes, are very expensive. This leads to them becoming discouraged from taking out a loan in the formal system. For this reason, the Compensar expert recommends that, “Before purchasing any financial product, it is essential to become familiar with basic concepts such as interest rate, late payment interest, and so on.the minimum payment, the payment term, among others. Financial education is the basis for having a good credit life.”
3. The basic principle of finance: nothing beyond income
It is very easy to spend, especially when you are young. But it is crucial to look at the reality of what paying off a loan entails. “The percentage of income allocated to paying off debts should not exceed 30% “in order not to compromise financial stability with this new obligation,” the expert recommends.
Spending is easy, especially when you are young. But it is crucial to look at the reality of what paying off a loan entails. | Photo: Getty Images- iStockphoto
4. To get better interests
Young people tend to be in a hurry. But when it comes to taking out a loan, it is better to take some time to compare the offers available on the market.
In this way, you will not only be able to obtain better possibilities in terms of interest, amidst the competition of entities in the financial system to win users, but also, to take advantage of those that have additional benefits such as miles, points or life insurance.
5. There are easily accessible products
A young person’s credit life usually begins with an educational loan. Although these loans are usually backed by parents, they are key to increasing their score and building their credit history. Hence the importance of assuming this obligation appropriately, to show that one is a ‘good payer’.
6. Compensation Funds open doors
According to Rodríguez, the Compensation Funds are institutions that offer products designed specifically for people without credit experience. In general, these funds tend to have social products, with low-value limits, which, They are alternatives for young people who are starting their life in the financial system and are looking not to ruin it, so that in the future, when they require more complex loans, find the open doors to achieve it.
Digital banks offer greater flexibility and lower costs | Photo: Getty Images