Electricity bill loan: how does it work? Is it worth it?

Anyone who needs to borrow money quickly can turn to this credit category. 

Known as an alternative personal loan, this modality is intended for people who have difficulty accessing credit — such as consumers with bad credit. 

This option involves charging the loan directly to your utility bill, meaning the installment amount is added to your electricity bill. This means you pay everything in one payment. 

In today's article, we'll show you a little more about this modality to help you know if it's the best option for you. 

Do you need a personal loan? We'll explain below: 

• What is the loan on the electricity bill? 
• How to apply 
• Its advantages and disadvantages 
• Is it possible to take out more than one loan at the same time? 
• Is it worth hiring this modality? 

What is the loan on the electricity bill? 

Electricity bill loans are a type of credit designed for people with lower approval rates for other types of loans. In other words, those with bad credit. 

According to the SPC, in 2019 alone, almost 50% of the Brazilian population had their name restricted at some point. 

In other words, a large portion of Brazilians pose a risk of defaulting on loan payments to financial institutions. Because of this, credit approval becomes more difficult, and this is where a loan on your electricity bill can help. 

Since 2019, it's been possible to take out a loan with direct debit from your utility bill. This means that the installments will be paid monthly through your electricity bill. 

For example: let's assume that your average electricity bill is R$70 and you took out a loan totaling R$1,200 with interest and fees, to be paid in 10 installments of R$120, over 10 months your bill will be R$190 (R$70 for energy consumption + R$120 for the borrowed money). 

However, it's important to note that the maximum installment amount is typically limited to twice the average bill amount. This helps minimize the risk of default.

How to apply for a loan on your energy bill? 

Before applying for this type of credit, there are certain requirements you must meet. See below. 

• Be over 21 years old; 
• Have a bank account; 
• Be the holder of the electricity voucher; 
• Have your invoices up to date; 

In addition to these topics, it is important to check whether the electricity provider in your region offers this possibility. 

An electricity bill loan requires a bank account, as the company deposits the funds into it. Furthermore, the account holder must be the same as the one on the electricity bill. 

Generally, to be approved for credit analysis, you must be over 21 and have your bills up to date. So, if you have any outstanding debts, you'll need to settle them before applying.

In addition, check whether this modality is available in your state, as it depends on the partnership with the energy provider. 

Don't forget to evaluate the companies that offer the service in your area and how to apply for the loan according to each company's processes. 

To hire the service, you must find an institution and present the requested documents, which are usually: ID; CPF; updated proof of residence and bank statement. 

Typically, the hiring process takes place online, but remember to ensure the website is trustworthy. Another precaution is to avoid providing document numbers via phone calls or text messages. 

Another thing you need to know is that the loan amount usually varies between R$$500 and R$$2,500. 

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Advantages and disadvantages of borrowing on your electricity bill

Advantages: 

• The money can be in your account within 24 hours; 
• The payment term is 3 to 18 months; 
• The process is simple and often online; 
• The installment will be twice the value of your energy consumption bill; 

Disadvantages: 

• You will need to undergo a credit analysis; 
• Rates vary from person to person; 
• It is necessary to have a bank account; 
• You must be 21 years old and 79 years old; 
• It is necessary to regularize overdue electricity bills; 
• Your energy bill will be more expensive for a few months. 

We must remember that you don't need to make a bank deposit to receive the money. If the company asks you to do so, be wary, as it could be a scam. 

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Is it possible to take out more than one loan on your electricity bill? 

It is very easy to obtain this loan, but not to take out two at the same time. 

You must pay off the previous one before requesting a new one. 

VIs it worth taking out a loan based on your energy bill?

Yes.

A direct loan from your electricity bill is worthwhile if you need immediate cash and want to increase your chances of being approved in your credit analysis. It's also a good alternative to avoid high interest rates, such as those associated with overdrafts.  

When analyzing whether it is really worth taking out this option, your main concern should be to evaluate the reputation of the company that will provide the credit. 

Never sign a contract if any advance payment is requested, as this is a strong indication of fraud. Among other precautions, it's also worth searching for the company on the Reclame Aqui website and checking its market performance. 

Also, be sure to check the fees and how they affect the contracted amount; after all, it's something that will affect your family's budget for a while. 

Even though it's a good option for those with a lower income, a low credit score, or a negative credit rating, be sure to think carefully and consider whether you need to apply at this time.

See if there's an alternative that solves your problem without compromising your financial situation. Your electricity bill will be significantly higher for a period of time. 

Conclusion 

A utility bill loan is reliable and a good option to consider when your budget is tight and you need cash for certain matters. However, as with any financial situation, it's important to weigh the pros and cons before signing the contract. 

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