How the consortium works and what are the advantages

How a consortium works is one of the most common questions asked by those looking to purchase a property.

This is because the consortium has been presented as an alternative to financing.

But is it really worth it? How does it work? What are the rules and benefits? 

These and other questions can be answered throughout the content we have prepared below.

That said, to understand everything about consortiums, continue reading! 

How does the consortium work?

You've certainly heard about the consortium at some point in your life.

Whether through advertising, or even through a recommendation from someone you know.

This indication generally occurs right after you say you intend to buy a car, motorcycle or something like that.

What they usually say is that the consortium is much more worthwhile than financing.

But is this true? How does the consortium work?

The first thing you need to know is that a consortium is a purchasing method.

In this modality, you join a group of people who have a common interest.

This interest usually involves purchasing vehicles, houses, and other items.

In this group, all members pay a monthly installment, which goes to the so-called “common fund”.

This fund serves as credit to support the consortium members in acquiring the proposed asset.

Thus, when payments are made, the consortium administrator carries out draws or payment of quotas.

During these draws or payment of quotas, all group members have the chance to be considered.

If successful, the person receives credit for the amount needed to purchase the item.

So, in practice, it works like this: you join the consortium for a car worth R$ 23,000.00, pay your installments, and periodically participate in draws. 

If you are drawn, you will receive the amount of R$ 23,000.00 to purchase the vehicle.

It is worth mentioning that all members must be drawn by the end of the consortium period.

So, in this modality, everyone has the opportunity to receive the money, sooner or later.

Consortium x financing 

In the previous topic, we explained in a practical way how the consortium works.

But, do you remember that we said that many people tend to say that the consortium is more worthwhile than the financing?

So, let us now discuss this issue in order to know if it is true.

The first thing we need to understand is that both the consortium and financing are ways to purchase a good in installments.

In the case of financing, you pay off a certain amount of credit in installments over a period of time, which is usually long.

The main issue with financing is that it involves interest, which is usually quite high.

This way, many people end up getting discouraged when they realize that in the end they will pay back much more than they borrowed.

Furthermore, it is not possible to obtain financing without a down payment. 

But, when it comes to advantages, financing is for those looking for faster money.

That's because you don't have to wait to be considered.

Once financing is approved, the credit will be immediately available for your desired purchase.

In the case of a consortium, there is no interest charged.

Besides being easier to obtain, because you don't necessarily need to have a clean record.

But, if there is one thing that the consortium loses, it is in relation to the speed in acquiring the asset.

This is because, as we have already seen, you need to wait to be considered, which can be quick, or take a long time.

Therefore, it is not possible to determine that one is better than the other.

Because, although the consortium is interest-free, it may end up taking longer. 

It all depends on what you're looking for, as well as how long you're willing to wait to purchase the item in question.

What are the advantages of a consortium?

Knowing how the consortium works is essential to making an informed decision.

However, we failed to highlight the advantages of this modality, as they are very attractive.

Although it is not possible to determine that a consortium is better than financing, it is its advantages that make it preferred by some customers.

Therefore, we will now see what differences are observed by those who adhere to this modality.

• Interest-free installments;
• Smaller plots;
• It is not mandatory to have a clean record;
• Possibility of being considered quickly;
• No down payment required; 
• Possibility of placing bids that put you at the top of the contemplation list. 

As you can see, if you are looking for a highly profitable purchasing method, a consortium is the option.

So, for those looking for financial relief by purchasing in installments, it's the ideal solution! 

Common questions about how the consortium works

Throughout this material, we were able to understand how the consortium works in general.

But, there are some very common doubts about this topic.

Below we have selected the main questions to help you understand everything about the subject.

1. How long does it take to be considered? 

That depends. This answer depends on the number of members in the consortium, as well as the value of the desired asset. 

It is also worth considering the period for draws.

There are administrators that draw lots and pay out quotas monthly, which makes the award process faster.

So, do your research and choose a consortium option that makes it easier to contemplate.

2. Why doesn't the consortium have interest?

The consortium has no interest because it does not function as financing.

In the consortium, the group itself raises funds to pay everyone.

In this way, the consortium ends up functioning as a rotating payment, where each period one person is drawn and receives a portion of the deposited amounts.

This way, there is no interest applied, since there is no loan from the bank. 

3. What types of consortium are there?

The consortium is used to acquire goods in installments.

Therefore, the same can be done for purchasing houses, trucks, cars, motorcycles, agricultural machinery, among others.

There are a wide variety of options on the market, so it's worth doing some research! 

4. Does the consortium have risks?

Yes. There are risks in the consortium, and these are related to the honesty of the management company.

The biggest risk is that the company will not honor payments and will keep the amounts deposited by the group. 

Therefore, choose established companies with good market ratings.

Furthermore, if the group presents a high level of default, the consortium may suffer losses.

Therefore, it is worth doing a good consultation in order to verify the reliability of the desired consortium. 

How to choose a company for a consortium

Finally, we just needed to talk about the request.

After all, choosing a reputable administrator is just as important as knowing how the consortium works.

The first thing you need to do is determine the type of consortium you intend to form.

This is because, if you are buying a car or motorcycle, for example, the ideal is to look for reliable dealerships.

Volkswagen and Honda, for example, are renowned companies in the vehicle consortium market.

For real estate, the ideal is to look for banks, such as Caixa Econômica Federal and Bradesco. 

After choosing the consortium, check some points, such as:

• Number of consortium members;
• Installment value;
• Method of contemplation (draw or quotas);
• Possibility of placing higher bids and being prioritized for consideration.

These points will help you choose the ideal option for your needs.

It is worth reinforcing the recommendation that you never opt for consortiums made by unknown companies.

As we have already said, the only risk of the consortium is the possibility of the company not being honest.

Therefore, always choose reliable companies with a good track record for this type of service. 

So, now that you know how to apply for a consortium, be sure to look for the ideal option for your achievement!