Borrow wisely and avoid too much debt
Before signing any credit agreements, understand the cost of credit and the terms and conditions of different credit agreements. The credit provider must give consumers a pre-agreement statement and quotation. These outline the terms and conditions of the proposed agreement and all costs involved.
According to the National Credit Act (NCA), before credit providers extend credit to consumers, they must conduct an affordability assessment. Be honest when providing information during application. You’ll then be protected by the National Credit Act.
Ask what interest rates you’ll be charged including all other charges that will be added before signing the credit agreement. You can negotiate the interest when you get the pre-agreement statement and quotation. You can use these to shop around for better deals. Only borrow from a registered credit provider.
Tips for borrowing wisely:
Borrow as little as possible: Borrowing to fund your children’s education or a home loan can be a good thing, but borrowing for consumables, such as groceries, to pay off oth- er debt or to fund luxuries can condemn you to a lifetime of debt. Consider the interest and other charges and how this will affect your ability to save. Avoid paying over too many months.
Signing: Never sign a blank credit agreement.
Cooling-off period: In terms of the NCA, a cooling-off period only relates to credit agreements signed at premises besides that of the credit provider. It’s valid for five business days.
Credit insurance: Familiarise yourself with the terms of the insurance.
Create and stick to a monthly budget: Will you be able to pay for your new debt once you’ve covered all expenses? Plan for unexpected costs and keep receipts of payments.
Start saving consistently: Put aside at least 15% of income every month in an investment.
Pay debts on time: Paying late or not paying the full instalment will negatively affect your credit rating and your ability to take future credit. If you won’t meet your monthly instalments, contact your credit provider immediately and try to re-arrange payments.
Prioritise your home loan. Check your credit report regularly. Nomsa Motshegare is National Credit Regulator CEO