It is possible to make a loan and give your mobile as collateral. If you do not pay, the device is locked. But how does it work and what are the advantages and disadvantages of the sport?
Giving assets as collateral for loans is not new. Using the property or a car as collateral for credit is a consolidated model in the market.
But the technological advance has brought some new possibilities and one of them is the use of mobile phone as collateral for the loan. The model is already common abroad and gradually arrives in Brazil.
But the model still has restrictions and disadvantages that we will list. The research was based on the conditions offered by the only company offering this type of credit at the date of this text.
How Cellular Loan Works as Collateral
The customer downloads a mobile app where they will place the order and where credit analysis and document verification will take place. If all is approved, the loan is made within one business day.
The values range from $ 300 to $ 3,500 and the installment of four to 12 months. With CET (Total Effective Cost) ranging from 6.28% per month (107.67% per year) to 11.48% per month (268.29% per year).
When the customer does not repay the loan, the mobile phone is blocked and you can only use the financial application to make the payment or call emergency services, such as the police. The financial company can also take the cell phone in case of default and the customer is negated.
Payment is flexible, meaning there is no right day to pay. After a 30-day grace period, the customer is allowed to use his mobile phone as he pays some amount. Like a phone credit purchase. After discharge, the company removes the lock.
Explaining better: The amount due on the loan converts to credits that the customer must pay. As the customer makes payments, the system converts this into handset release days.
For example, the amount due is $ 600 and the term is 12 months, ie 365 days. The number of days is divided by the amount to be paid, giving 1.64. In this hypothetical case, for every $1.64 paid by the customer, one day of use of the device is released.
Advantages and disadvantages
The model is still starting in Brazil and the use is still very restricted. At the time of our consultation, the app was available for phones using Android technology and only a few Samsung devices are accepted.
Another disadvantage is the interest rate. The big advantage of secured loan is a lower CET; after all, if there is no payment, the bank can take good of the customer.
The values presented are above those practiced by the market of loans with collateral, but it must be considered that the product is quite different from the traditional ones, with a riskier collateral.
The low value (up to $3,500) is also an impediment, but may be good for those who need little money in an emergency and do not want to resort to overdraft.
Another advantage is the non-payment of interest and penalties in case of delay. The only punishment is to lock the cell phone when the “credits” of use end and the seizure of the phone.
Differences With Personal Loan
Unlike cell phone secured loan, the personal loan does not ask for collateral from the customers. Credit analysis is what determines the approval, rates and terms.
The personal loan also lends larger values with average rate lower than the minimum practiced by the company consulted for the post.