Debts in Costa Rica

Introduction:
This topic is very important because people in Costa Rica don’t have a good
education about their own finances, in addition to most people don’t know how to
think before doing a new purchase on credit and they are influenced by their
impulses without first doing an important analysis.
I want to talk about that important analysis, however first I want to share this
information with you to understand why you should do an analysis before getting a
new debt.

Are people ready to handle debts in Costa Rica?

Even though, having a job and a salary is important for getting a debt, that isn’t
enough for handling debts. To be honest the most people don’t know handle a
debt, due to almost no one receives financial education or at least advice over how
to handle a debt. In Costa Rica when the youngest people have their first job, they
want to buy a lot of things and when they spend all money, always look for other
ways to make purchase immediately without waiting and in that moment is when
people acquire debts without thinking on the consequents, for instance the credit
cards.

The importance of financial education:

Is important to include the financial education in the people’s life since the
beginning of their learning. In that way people are going to manage their finance
properly. Some ways to get financial education are: School and High school,
People should get this education in the school. However as most of schools don’t
have this topic in their plan studio, people need to look for the information by
themselves. Accordingly, one of the main sources for getting a financial education
are web sites.
On these web sites you can find a lot of information about debts, financial
education and you could learn what is the best option for you in case that you need
to get a debt.

What are the most common types of debts in Costa Rica?

We can tell in Costa Rica there are 2 common types of debts the first is:
Mortgage
This loan is very important when people don’t have money or when they don’t have
all money for buying a house.
This credit is friendly with people, because it has very low interest rate compared to
other debts, what’s more if you nowadays rent a house, this debt would be a good
option, because you can buy a house paying an amount similar to the rent. In this
way you will pay your own house little by little.
Personal Loans
This credit is the most common because you can buy anything, although the
interest rate is the highest many people use it a lot.
Some examples would be credit cards, department store card, and other.
On the other hand, if you couldn’t pay any of these debts, the consequences will be
disastrous in your life.
Pay attention to next information

Chart:

TYPS OF DEBTS IN C.R

More than one
credits

Others

Personal Loan

Mortagage

Credit Cards

0% 10% 20% 30% 40% 50% 60% 70% 80%

According to MEIC in Costa Rica people have big over-indebtedness, in relations

with their incomes.
More than 70% of households in Costa Rica have a debt and from the 70%, 44 %
are debts that people were not paid.
Now that we know about some debts we can speak about the consequences

Consequences
What are some of the consequences if you do not pay a debt?

The consequences usually come set up together. First, a Bad credit report. It
will affect your reputation in banks and stores showing derogatory information in
the report. After that, the lenders will apply a wage garnishment trying to recover
the money. Then, an order is sent to freeze the balance in the account. Finally,
credits will be denied, due to the credit history. Consequences can generate a
negative impact in people’s life. Two of the most common are people lose their
houses due to the difficulties for paying the mortgage. Besides, people lose the
immovable property, cars, and others.
Another crucial aspect is
What can I do if I cannot handle a debt? The first thing I should do is ask for an
agreement with the bank if that doesn’t work the second step is to look for a credit
advisor for organizing your expenses and explain you what is the best option about
your case. Finally, if it doesn’t work you must support yourself in the constitutional
law for validating your rights and look for a lawyer.

What is one of the best practices I can follow before getting a debt:
One of the best practices I can do is perform this questions to myself. In this case
for having a good explanation let say a person will buy a new car when he already
has an old car:

1. Is this car necessary in his life?

2. What benefits Can he have with the new car?
3. Can he afford it?
4. Can he have the same benefits without getting the new car?
5. Will the car become an Asset or liability (Activo o pasivo) ?

If the answers are negative you don’t need the care.