THE PARADOX OF CONSIGNMENT LOANS IN BRAZIL: AN ANALYSIS BETWEEN LACK OF FINANCIAL EDUCATION AND OVER-INDEBTEDNESS

Abstract

Consignment credit, a loan modality whose installments are directly deducted from the borrower's payroll or benefit, has consolidated itself as one of the main credit options in Brazil. Its attractiveness lies, above all, in supposedly lower interest rates compared to other credit lines, justified by the financial institutions' lower perception of default risk. However, what presents itself as an accessible and advantageous financial solution often proves to be a catalyst for over-indebtedness, especially among the most vulnerable population segments. This article aims to analyze the paradox of consignment credit in the Brazilian context, exploring how this modality, despite its promises, can drive individuals and families into an unsustainable debt spiral. Recent research indicates a worrying scenario of uninformed and impulsive use of consignment credit, exposing the lack of guidance and borrowers' lack of awareness of the real costs and long-term impacts on their finances. The study delves into the profile of consignment credit borrowers, highlighting public servants, retirees and INSS pensioners, and formal workers (CLT). For each group, research is presented showing how the ease of access to this credit modality can turn into a budgetary imbalance. The text analysis is based on data revealing that most borrowers are unaware of the details of their contracts and use credit non-strategically, often to pay off other debts, which can worsen over-indebtedness.