When is a Loan Financially Smart? 7 Scenarios Where Credit Makes Sense

When a Loan is Financially Smart, Here's what you'll discover in this article:

When is a loan financially smart? The golden rule.
What are the 7 scenarios in which credit actually makes sense?
How do you calculate whether your loan will make you richer or poorer?
When is taking out a loan NOT smart (and how to avoid pitfalls)?
Frequently Asked Questions about Smart Loans

When is a Loan Financially Smart? The Golden Rule

The short answer is: when the return generated by the borrowed money is greater than the total cost of the loan (interest + fees + inflation) and, at the same time, you maintain sufficient liquidity for emergencies.

In other words: a smart loan is one that puts more money in your pocket than it takes out.

Think like an entrepreneur: nobody starts a company with 100% of their own capital if they can leverage it at a low cost.

The same applies to individuals.

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The mistake most people make isn't taking out a loan – it's taking one for the wrong reason or at the wrong time.

A loan is like a chef's knife.

A knife can cut vegetables, or it can cut your finger.

The problem was never the knife, it was who was holding it.

The credit works exactly the same way.

What are the 7 scenarios in which credit really makes sense?

1. When you use the loan to buy an asset that appreciates faster than the interest.

Properties below market value, land in areas with developing infrastructure, or even actions taken during moments of historical panic (such as March 2020) fall into this category.

Real-life example: In 2023, João took out a mortgage of R$380,000 at 8.7% per year + TR to buy an apartment for R$480,000 off-plan, scheduled for delivery in 2026.
By 2025, the same property will already be worth R$ 820 thousand.

The capital gain (R$ 340 thousand) far exceeded the interest paid.

Result: Net worth grew R$ 290 thousand net of costs.

2. When the loan finances education or training with a proven return.

Programming, medicine, aviation courses, or even international MBAs that increase income by 100–400% in less than 3 years.

Study of Getulio Vargas Foundation shows that those who pursue postgraduate studies (master's/doctorate) have an average income 126% higher compared to those with less education, even with recent declines in the wage premium.

If the cost of borrowing is less than that gain, the math is obvious.

3. When you consolidate expensive debts into a single, lower-interest loan.

Swapping your credit card (average 320% aa) and overdraft (180% aa) for a home equity loan at 12–15% aa is one of the smartest moves possible.

Real-life example from 2025: Mariana owed R$ 78 thousand on credit card + overdraft.

They took out a loan secured by a vehicle at 1.49% per month.

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The savings in interest amounted to R$ 4,200 per month – the equivalent of an extra salary.

4. When a business opportunity arises with a quick and high return.

Purchase of inventory with a cash discount, entry into a proven profitable franchise, or acquisition of a struggling competitor.

Therefore, it's feasible!

5. When the government subsidizes interest rates (and you follow the rules)

Credit lines such as Pronampe, Caixa Habitacional, or BNDES Microcredit often have rates below inflation plus the Selic rate.

In these cases, the loan is literally free money in the long run.

6. When you need to keep liquid assets invested that are yielding more than the cost of borrowing.

Classic example: you have R$ 500 thousand in CDB, 110% in CDI, but you need R$ 200 thousand for a down payment on a property.

Instead of redeeming (and paying income tax), take out a loan secured by the investment itself at 9–11% aa

The positive spread continues to work in your favor.

7. When the loan prevents greater losses (health, housing, transportation)

Emergency operations, repairing the only car that gets you to work, or preventing eviction fall into this category.
The loss of income would be much greater than the interest.

Scenario	Expected Return	Average Loan Cost	Intelligent?
Undervalued property	12–25% aa (appreciation)	8–11% aa	YES
High-return education	+120–400% in income	12–24% aa	YES
Consolidation of expensive debts	Economy of 150–300% aa	12–18% aa	YES
Inventory purchase with 100% margin	80–200% in 90 days	18–36% aa	YES
Subsidized lines of credit (Pronampe)	Inflation + 3–6%	4–8% aa	YES
Keep your investment yielding returns.	11–14% aa	9–11% aa	YES
Health/housing emergency	Avoid total loss of income.	Any reasonable rate	YES

How to Calculate if Your Loan Will Make You Richer or Poorer?

Use this simple 3-step formula:

Total Effective Cost (TEC) of the loan × amount × term
Expected return on money use (net of taxes)
Difference = your actual profit (or loss)

If step 3 is positive and you have an emergency fund to cover 12 months of installments, go ahead.

A rhetorical question everyone should ask before signing:
"If I put that same money into Treasury Selic today, would I be happy to pay that interest to someone else?"

If the answer is no, it's probably not a good loan.

When Taking Out a Loan Isn't Smart (and How to Avoid the Pitfalls)?

Avoid like the plague:

Financing durable goods that depreciate (4K TV, top-of-the-line cell phone)
Paying for a trip, wedding, or Christmas celebration with long-term payment plans.
Taking out a loan to "cover" another loan without reducing the interest rate.
Taking out credit just because "it's easy" or "the manager offered it"
Any proposal that requires an upfront fee to "release" the money.

These are cases where credit transforms stable individuals into chronic debtors.

When a Loan is Financially Smart: Frequently Asked Questions

Question	Response
Can I consider taking out a loan to invest in stocks or crypto?	Only if you're willing to lose 100% of the borrowed money. In practice, it's almost never smart.
Is a home equity loan worthwhile in 2025?	Yes. Rates have fallen to 8–11% aa + TR and terms reach up to 30 years – the lowest cost in history.
What is the best possible rate in Brazil today?	In December 2025, lines of credit with real estate/FGTS guarantee are between 8.9% and 12.5% aa. Consult the... Central Bank rate ranking For updated information.
Is it possible to negotiate the rate after signing the contract?	Yes, especially in mortgage financing. Loan portability has reduced the average cost by 2–4 percentage points by 2025.
Is a payroll loan always the best option?	Only if you are a public servant or a retiree receiving benefits from the INSS (Brazilian National Social Security Institute). For private sector employees under the CLT (Brazilian labor law), rates increased significantly in 2025.
Is it worth paying cash or financing with low interest rates?	Do the math. Often, financing and letting the money earn interest in Treasury RendA+ or CDB 120% CDI comes out ahead.

Taking out a loan is not a sign of lack of control – it's a sign of maturity when done at the right time.

Smart lending isn't about being afraid of debt.

It's about respecting mathematics and using the financial system to your advantage, just like the wealthy have been doing for centuries.

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By: Andre Neri updated ago 3 weeks back