Consortium: Understand How It Works Today
You've certainly ever heard of consortium, haven't you? The payment method in question is one of the most famous.
The consortium is usually present when buying high-value goods, such as vehicles or real estate.
Despite being a well-known form of payment, there are few people who really know how everything happens and what they should do when participating in one.
With this, they cannot establish whether or not it is advantageous for their financial life. Therefore, if you are interested in knowing more details about it, keep checking all our content.
Consortium - What is it and how does it work?
As we have previously highlighted, the consortium is basically a form of payment aimed most of the time at things with a higher value.
An interesting thing to make clear right away is that it generally works as a collective payment.
To make our explanation simpler, imagine that we are referring to a vehicle consortium.
In total, there are forty people interested in conquering their dreamed vehicle, for that, everyone must pay a certain amount in installments.
The value in question is established by the company responsible for the consortium.
Adding together the amount paid by everyone in the first month, there will soon be enough money to pay in full for a vehicle.
To decide who will be contemplated in the first month, there will be a draw.
As the months go by, the same thing will be done, and new people will be contemplated, but obviously for you to be chosen, you need to be up to date with the installments.
However, a not so pleasant condition that can happen is that you are the last one contemplated, that is, it will take months for you to conquer your car, motorcycle, or any other vehicle that you are interested in.
An important detail to make clear is that the definition of which participant will be contemplated in a given month can also come through bids.
That is, the person who offers a higher value as a bid will soon be able to acquire your vehicle.
What is a bid on a consortium?
A bid is precisely a way that participants in a consortium find to try to be contemplated more quickly.
In this case, it is basically necessary that you make an offer of great value in a given month, which obviously does not take into account the value of your installment.
If the offer given is greater than that of all the people in the group who offered, then you will be able to win your desired vehicle.
Otherwise, the following month if you are still interested, you will have to bid again and then try your luck.
It is interesting to make it clear that all these amounts that you are paying in excess will always be deducted from the value of your letter of credit.
What is a letter of credit in a consortium?
In a very simple way to explain, it can be said that the letter of credit is nothing more than the bridge that connects the consortium of your vehicle.
That is, when joining a consortium, you define the value of a letter of credit, so that over time you can pay it off.
The payment in question, as previously mentioned, is made from the consortium installments and also from the bids.
Therefore, it can be said that the value of your letter of credit is the value of your vehicle.
An interesting condition to highlight about such cards is that they can be sold, which in fact we cannot say that it is something advantageous, much less disadvantageous.
I say this because it is very unlikely that you will make a profit, if you do, the chances are low that it will be relevant.
