Consortium: How It Works and When It’s Worth It

What is a consortium?

A consortium is a collaborative purchasing method where a group of people comes together to acquire assets, such as real estate or vehicles, through monthly installments. Each consortium participant pays a monthly amount, and periodically, one or more participants are drawn to receive a credit letter and make the purchase.

This system is regulated by the Consortium Law and is an alternative that can be advantageous for those who are not in a hurry to acquire an asset and seek to avoid high financing interest rates.

How does a consortium work?

When joining a consortium, you commit to paying an administration fee, which varies according to the administrator and the asset's value. This fee is charged to cover the costs of managing the consortium. Additionally, there are bids, which are additional amounts that consortium members can offer to try to expedite their contemplation.

Administration fees

The administration fee for a consortium usually ranges from 15% to 20% of the total asset value. For example, if you want to acquire a car worth R$ 50,000, the administration fee could be up to R$ 10,000 over the consortium period. It is essential to calculate this amount when deciding if the consortium is the best option.

What are bids?

Bids are a way to try to expedite contemplation. When you make a bid, you are offering an additional amount to your installments. For instance, if you are paying an installment of R$ 1,000 and decide to bid R$ 5,000, it may increase your chances of being contemplated in the next draw. However, there is no guarantee that you will be contemplated soon, as this depends on the number of consortium members and luck.

When is a consortium worth it?

A consortium can be advantageous in some situations, such as:

• When you are not in a hurry: If you are planning to buy an asset in the long run, a consortium can be a good alternative.
• When you want to avoid high interest rates: Compared to financing, a consortium may have lower costs, especially if you manage to be contemplated soon.
• When you are financially organized: The consortium can be a way to enforce financial discipline, as you will have a monthly commitment.

When to choose financing or saving?

In some situations, the consortium may not be the best option. Consider:

• If you need the asset immediately: If you need a car or property quickly, financing may be more suitable.
• If you already have a financial reserve: If you can save and invest the amount you would pay in the consortium, you might achieve a better return.
• If the administration fees are too high: Do the math to see if the amount you will pay in the consortium is not greater than what you would have with financing.

Conclusion

A consortium can be a great option for those looking to buy an asset in a planned manner and without the high interest of financing. However, it is important to analyze your financial situation and needs. Do the math, compare with other options, and see if it is really worth it. If you've decided that the consortium is for you, start researching the best administrators and the best conditions!