What is Self-financing?
It is an alternative to acquire goods and services such as a house, car or building a property. Unlike a loan, which is required from a financial institution, self-financing It is made up of a group of people who each period enter capital into a common fund.
Characteristics of self-financing
There are five options by which people can dispose of the trust:
- Lottery: Members who pay on time can participate in a random procedure.
- Settlement: when the total of the service purchased is settled to the provider.
- Antiquity: depending on the age of the client’s adhesion contract compared to that of the other members of the group, the delivery of the good is determined.
- Punctuation: On the award day, it will be awarded to the contracts with the highest scores.
- Auction: quotas are given in advance and resources are provided to whoever has the highest points.
As it is not a credit, there is two types of self-financing:
- Closed: made up of an exact number of members and ends when all have completed the payment.
- Open: allows constant entry of participants and exit of those who have already completed their contribution.
These groups must have a maximum of 180 consumers, but in the case of real estate it can reach up to 600 participants.
Recommendations before choosing a self-financing
Companies dedicated to this must have a adhesion contract registered with the Federal Consumer Prosecutor’s Office (Profeco) and authorized for its operation before the Ministry of Economy (SE). So before participating in a self-financing, you can check that you are registered with the Profeco Commercial Bureau.
In the portal of the Citizen Contact Center of the Ministry of Economy, it will be possible to know the authorization by this agency.
A self-financing company cannot provide cash, credits or loans. If they do, they are committing a fault and must be reported to Profeco.
What should the adhesion contract contain?
At a minimum, the following should be specified:
- Number of consumers that make up the group and the number that corresponds to the person interested in participating.
- Number of periodic installments.
- Specifications of the good or service such as brand, model, type, gender or way of determining it.
- The price of the good and the reasons why the amount to be paid is updated.
- Frequency and procedure to obtain the resources as well as the means and periods in which the provider will notify the results of the awarding events.
- Amounts of penalties or causes for termination that must not exceed three periodic contributions.
- Type of insurance and coverage that the provider can purchase.
Self-financing companies should not request money until both parties sign the contract. This document must contain the registration number issued by Profeco.
According to Profeco, you have five days apart from the signature to cancel it, but as long as you have not participated in any awarding event.
When deciding to cancel, the provider will have to be notified and the provider will have to pay within 25 calendar days following the notice. If you do not do it in that period, you will have to pay delinquent interest.
At the end of the contract, the liquidation of the group must be carried out within the 60 calendar days following the expiration date.
For more information, the self-financier must provide a consumer manual and the adhesion contract on your website or branches.
What payment could the self-finance company request?
As an obligation of the consumer, you may have to cover a total periodic fee, administration, registration, transfer of rights, voluntary replacement of the good.
These amounts may not change during the term of the contract.
Advantages and disadvantages of self-financing
The pros are for those who do not have enough resources to give a down payment on a house or car. Also because some do not ask to prove income and yese can acquire an asset by gathering family income.
Similarly, this system does not penalize if contributions are made in advance to finish a term.
These finance companies usually provide Life Insurance for total permanent disability or disability, if the participant pays on time.
The disadvantages is that since it is not a loan or credit, you cannot obtain resources to pay a debt or buy any product.
Self-financing companies in Mexico
The companies that concentrate more than 90% of self-financing are Autofin, Sicrea from Nissan, Afasa from Volkswagen, Suauto General Motor and Conauto from Ford.
According to the Mexican Association of Automotive Distributors (AMDA), self-financing companies grant more than 60% of the loans for the purchase of a car.