Finweek English Edition - - MONEY -

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Uh oh, I thought, this can’t be good news. She wants to leave.

I mo­tioned Mar­garet to the ta­ble and we sat down. She clasped her hands to­gether, with her head bent for­ward, and her l ips pursed tightly to­gether. Even­tu­ally, she stam­mered: “I’m i n trou­ble.”

“Why, what’s wrong?” I asked, try­ing to re­as­sure her.

She pulled out a folded sheet of pa­per and slammed it down on the ta­ble. “It’s too much,” she sighed, “It ’s just too much.”

I picked up the pa­per and stud­ied it care­fully. It was a credit agree­ment writ­ten up by one of the l arge f ur­ni­ture re­tail­ers and signed by Mar­garet. She had pur­chased a R3 000 hi-f i set for Christ­mas and now had to pay it back in monthly l oan i nstal­ments. She was strug­gling to make ends meet.

I had a look at the terms of the loan and was more than a lit­tle shocked. The monthly re­pay­ment was a lot higher than I thought it would be. I crunched the num­bers and worked out that the ef­fec­tive loan rate was in ex­cess of 50% a year. Was this ex­or­bi­tant rate even le­gal un­der the Na­tional Credit Act?

What really sur­prised me was that the in­ter­est rate quoted in the credit agree­ment was only about half what I had cal­cu­lated. Was this a de­lib­er­ate at­tempt to mis­lead an un­sus­pect­ing con­sumer? I read the agree­ment more closely and then dis­cov­ered the rea­son for the dis­par­ity. The re­tailer had at­tached a credit life in­surance pol­icy on to the loan as well. So if Mar­garet were to pass away be­fore the loan had been re­paid, then the in­surance com­pany would cover the cost

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