Con­sumers urged to bor­row wisely

Business Day - Home Front - - HOMEFRONT -

LOSE DEBT Be­fore tak­ing on debt, Credit Om­bud Manie van Schalk­wyk urges con­sumers to make sure they un­der­stand the true costs of bor­row­ing and pay­ment con­di­tions.

“You can end up paying many more times what you bor­rowed in in­ter­est alone,” says Van Schalk­wyk. “In­ter­est rates dif­fer for long-term debt such as home loans and short term debt such as credit and store cards.” While your home loan may cost be­tween 8%12% in in­ter­est on out­stand­ing amounts, credit cards will cost you up to 22% in­ter­est a year. When it comes to tak­ing short-term loans, credit providers are al­lowed to charge you up to 60% in­ter­est. “Bor­row­ing to fund your chil­dren’s ed­u­ca­tion or a home loan can be a good thing, but tak­ing on debt to pay off other debt or fund lux­u­ries can con­demn you to a life­time of al­ways be­ing in the red.”

Van Schalk­wyk also warns that con­sumers should in­ves­ti­gate debt con­sol­i­da­tion of­fers from banks thor­oughly. “It may be eas­ier to man­age your re­pay­ments, but make sure you are not paying a very high in­ter­est rate on both your long- and short-term debt.”

Un­der the Na­tional Credit Act, it’s your right as a con­sumer to be given a prea­gree­ment state­ment and quo­ta­tion when seek­ing credit. Th­ese will out­line the terms and con­di­tions of the pro­posed agree­ment and all the costs in­volved. “You must know what is ex­pected of you prior to sign­ing the credit agree­ment,” ex­plains Van Schalk­wyk.

An­other key fac­tor is en­sur­ing that the credit provider has all the in­for­ma­tion for an af­ford­abil­ity as­sess­ment. This en­sures you do not bor­row more than you can af­ford.

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