consignado

Consignado is a type of credit in which the loan repayments are automatically deducted from the borrower’s salary, pension, or other social benefits. The term is commonly used in Portuguese-speaking countries, especially Brazil and Portugal, and is often called crédito consignado or empréstimo consignado. The key feature is the repayment through payroll or benefit deductions, which lowers the lender’s risk and typically allows lower interest rates and longer repayment terms than many unsecured loans.

How it works: the borrower applies to a bank or financial institution, which assesses eligibility based on current employment status or benefit receipt. If approved, the monthly payment is debited directly from the paycheck or benefit before the funds reach the recipient. This automation helps ensure timely payments but means the loan is closely tied to ongoing income. In many jurisdictions there are regulatory limits on the portion of income that can be committed to such loans, and lenders may require insurance or other safeguards.

Who is eligible: consignado is usually available to employed workers, retirees, and pensioners, with eligibility criteria varying by country and contract type. Advantages include lower interest rates, fixed and predictable payments, and easier access to credit for individuals with limited options. Disadvantages include the risk of over-commitment if income decreases, the dependency on continued employment or benefit receipt, and potential penalties for late payment or early termination of the agreement.

Regulation: oversight and rules vary by country but generally address disclosure, limits on interest rates, and the permissible share of income allocated to payroll deductions.