How to borrow responsibly
The festive season has come and gone, leaving many in a desperate position. Not having planned for the New Year, they find themselves having to borrow for essentials such as school uniform, registration fees, stationery, transport money and food.
Out of desperation, these consumers might borrow recklessly and from unregistered credit providers, said Mpho Ramapala, education and communication manager at the National Credit Regulator (NCR). Ramapala said consumers should only borrow from registered credit providers. They should plan in advance how to repay the loans. Most important, they should determine whether they can afford the repayments. Credit providers also have an obligation to conduct an affordability assessment before granting credit. If you're thinking of borrowing to get out of a fix, the National Credit Regulator (NCR) says you must be sure to ask for a quote. The National Credit Act (NCA) allows you to be given a preagreement statement and quotation. These outline the terms and conditions of the proposed agreement and all costs involved such as interest, monthly service fees, once off initiation fees, credit insurance if there is any, a deposit if required, number of instalments, date of first instalment, and last instalment etc. You can also use the quotation to shop around for better deals. Also, you will know what is expected of you before you sign the credit agreement. In addition, you will be aware of the cost of credit and the terms and conditions before you sign. Once you've signed the credit agreement, you're obliged to honour its terms and conditions, including repayments.
Tips for borrowing wisely:
• Borrow as little money as possible. Borrowing to fund your children’s education or a home loan can be a good thing, but borrowing for con- sumables or to pay off other debt or to fund luxuries such as holidays or designer clothing can condemn you to a lifetime of debt. Only borrow for what you really need. • Avoid paying over too many months, as it will cost you more in the end. • If there is credit insurance, familiarise yourself with the terms to avoid surprises when you most need cover. · Be honest: make sure that you disclose all the information required by the credit provider. Dishonesty may cause you to lose the protection offered by the National Credit Act. • Create a monthly budget and stick to it. Work out how much income your family earns and what your total expenses are each month. Will you be able to pay for your new debt once you’ve covered all your expenses? You should also plan for unexpected costs, such as if one of your family members is retrenched. • Always keep receipts of your payments, as you might need these in the future. • Never sign a blank credit agreement because you won’t have control over other information added afterwards. • Always include savings in your budget. • Pay your debts on time. Paying late will adversely affect your credit report and possibly your ability to take out credit in the future. If you think you cannot meet your monthly instalments, call your credit provider immediately and try to re-arrange payments. Do not wait until you skip payments. • Check your credit report regularly. This way you’ll be able to identify any errors and correct them.
Under the NCA, you are entitled to one free copy of your credit report each year at any other time, upon payment of the inspection fee of the credit bureau if any.
For a comprehensive list of registered and cancelled or lapsed credit providers, visit the NCR’s website: www.ncr. org.za. For more information 0860 627 627 or email ncr.org.za. call