It is often believed that in times of uncertainty or economic crisis lOr it is better to pay off debts so as not to have to have money on a monthly basis that, in theory, could be used to meet other obligations such as salaries, rent, among others. And it is that, although it is true that there are occasions in which paying a debt in advance is usually the best option, there are others in which the advance payment of a credit can lead to liquidity problems in the future.
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According to Héctor Juliao, Managing Director of Corporate Banking at Credicorp Capital, The first thing that must be taken into account when making this type of decision is to review the current characteristics of your company’s credits, so that you can analyze which ones you could keep, which ones you should renegotiate, and which ones it is better to pay off early. .
“Another element to take into account when deciding the early settlement of a debt has to do with the rate. Once you have reviewed the current characteristics of your company’s credits, you will be clear about whether it is at a fixed rate (the rate does not vary in the face of changes in the market) or at a variable rate, that is, it is indexed to factors such as inflation. , DTF, UVR, among others, which in a context like the current one implies that your company is paying more and more for the same loan”, adds Juliao.
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Now, another factor that you must take into account, and perhaps the most important, is that of the box of your company. Analyze if the early payment of these credits will significantly reduce your resources on this front or if, on the contrary, you will still have significant money.
This is essential because in times of uncertainty or in the face of a possible recession, the best that companies can have to be protected against unexpected events is sufficient liquidity and money in the box. In this way, if the payment of credits leaves your company without cash, it is best to avoid it in order to be better positioned against any adversity that may arise, such as a decrease in income due to lower sales. Always keep in mind that a robust box can become your company’s lifeline during difficult times.
On the other hand, it is important to check if we have acquired cheap debts, because at a time when rates are rising exponentially like the current one, windows of rate intermediation are opening, in which your company can obtain returns by placing those resources, giving you more profitability than previously acquired credits.
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So, If you have credits at low rates and you have the cash to cancel the credit, before doing so it is advisable to study the investment alternatives, you may be able to find investment options today that cover the cost of credit with additional yield left over.
In any case, it will always be best to seek advice from financial experts, who will guide you along the way to make a more informed decision that is of greater benefit to your company.
