Villarrica is nice, there are lots of things around, good restaurants, and it is cheaper than Asuncion. I remember a friend paid 175 usd per month for a nice apartment in Villarrica, 2 bedrooms, bathroom living room, kitchen (one big area).
As Nico says, anywhere but Asuncion and metro area. Even CDE and Encarnacion is a bit expensive compering to Villarrica o Pilar (another good choice).
Best,