Auxílio Brasil loan becomes an outlet to pay for water, electricity, rent and renovation

Seamstress Maria de Lurdes Silva, 58, arrived early at the Caixa Econômica Federal branch in the Jardim São Luís neighborhood, south of São Paulo, on December 14. Unemployed, she went to the bank in search of a payroll loan from Auxílio Brasil in an attempt to get extra income to pay her household bills.

“I thought this plan was good [o consignado]🇧🇷 we just have to know [como funciona] not to regret it later”, he comments.

Like her, residents of peripheral neighborhoods in the capital of São Paulo have tried the payroll loan from Auxílio Brasil to help pay basic bills such as rent, electricity and water.

The credit modality that deducts the installments of the payment in the amount of the Auxílio Brasil has also been sought after by those who need to renovate their home or invest in work.

Maria de Lurdes says that the loan “would help” her day-to-day expenses, in addition to helping her invest in sewing services. To supplement the family budget, she has been selling dishcloths and sewing clothes for acquaintances. “Since I’m out of a job, I want to invest in something,” she says.

A resident of Jardim Colombo, in the south zone, Reginaldo Souza da Silva, 37, also wants to use payroll to pay his household bills and go shopping. He had the loan denied when making the request, for receiving the Brazil Aid a short time ago.

“Went to do [a solicitação] and the girl explained to me that she had to wait for the third installment.” He says that as soon as he completes the period he will try to be approved again. The rule of three installments is part of the list of requirements to release the benefit.

A study by the Plano CDE research institute pointed out that buying food and paying day-to-day bills were among the main reasons for the population of classes C, D and E to take out loans in the country in recent months.

A resident of Paraisópolis, Lúcia de Fátima, 50, has been looking for a loan with another objective: to renovate the house, which does not have a floor or plaster on the walls. “It was my dream to be at Christmas and New Year’s with the house tidy”, she says, who shares the property with her 18- and 30-year-old children. The eldest, like the mother, is unemployed. The youngest is taking the entrance exam for geography.

Lúcia even made the request at Caixa, but was informed that the authorizations for the loan had been paralyzed. She also had the payroll denied at another bank. “I just want it to open again [a liberação do empréstimo]🇧🇷

Since the elections this year, those looking for a loan at Caixa Econômica Federal have faced difficulties in obtaining approval. The bank started to limit the offer of credit lines and changed the analysis to the payroll of the Auxílio Brasil, as shown by the Sheet🇧🇷

With the changes, granting the benefit was restricted to customers with a good risk analysis. On social networks, complaints from people who did not get the loan have multiplied in recent days.

Asked about the denied loans, Caixa said that the payroll loan is still available for contracting. “The granting of credit obeys internal governance criteria, based on the market context, on the monitoring of its products and on the bank’s strategies”, stated the bank’s advisory, in a note.

In the Monte Azul neighborhood, south zone, Otaviano Mariano de Sousa, 54, knows several people who are in line to get the consignment. “They just say to wait, wait and nothing”, he comments on the banks’ response to colleagues.

He says he was one of the first to seek the loan when the modality was released by the federal government, in September this year.

Without a formal job since 2018, Sousa used the loan money to buy a paint mixing machine, which has facilitated the work on the nozzles as a painter. “For me it was great”, he says, explaining that he made calculations before applying for credit.

Experts warn that, as Otaviano did, it is necessary to understand the size of the impact of payroll deduction discounts and interest in order not to be harmed.

Coordinator of the Financial Services Program at Idec (Consumer Defense Institute), Ione Amorim says that the ideal is for people to apply for credit only in urgent situations or with planned investment, always calculating the risks of the modality.

“It is necessary to do this exercise of taking only what is extremely necessary because we are talking about a credit that, if it does not change, is very expensive. It is more expensive than all other types of payroll credit”, he explains.

With the loan and household expenses, only R$ 40 of the benefit remains

Ana Benício, 40, was unable to predict the impact that the loan discount would have and ended up regretting the decision. “The half [do dinheiro] went to pay the bill and the other half went to buy a fridge”, says she, who lives in Paraisópolis.

With the installment discount and the payment of household expenses, she has only R$ 40 per month left. “It was good at the time because I didn’t have a refrigerator, but afterwards it was bad”, says the beneficiary.

Ana’s neighbor, Odair José, 43, gave up joining the payroll after he found out how the charges would work. “When I read the rules, I saw that it wasn’t worth it.” He would use the loan to pay water and electricity bills.

Under payroll rules, up to 40% of the amount of the Auxílio Brasil, considering the permanent benefit of R$400, can be withheld to pay the loan installments, which are deducted directly from the family benefit. Those who contract the credit are obliged to pay the debt even if they are disconnected from the program.

The maximum interest rate allowed for the Auxílio Brasil payroll loan is 3.5% per month.

How to know when to join the payroll?

To avoid cases of over-indebtedness, Ione suggests that beneficiaries use the Central Bank Citizen’s Calculator and run simulations to assess how the installments will look and how long the payroll loan payment should last.

The economist also recommends that those who decide to opt for the loan try to get just the credit necessary for the family, and avoid committing large amounts of the family budget, opting for the maximum amount offered by the bank.

As an example, she gives someone who is behind on rent and will be evicted if they cannot pay. “In that case it is justifiable [pegar o consignado]🇧🇷 Yes. But you need to get all [o valor disponível]🇧🇷 No”, explains the economist. “Sometimes you will only need R$ 1,000.”

The specialist also makes one last warning: anyone who realizes that they are already in a situation of over-indebtedness should seek the Public Defender’s Office.

According to Ione, based on law 14,181, on over-indebtedness, the citizen has support to have the debt restructured in some plan with the institutions. “Be it one or several credit institutions, he may reach an agreement that makes this debt, within his payment capacity, viable”, he says.