Back to school: how to manage your credit this year
Parents warned about borrowing money
IT’S back-to-school season for millions of families across the country, and for some there may be a need to borrow money to take care of January expenses such as school fees, uniforms and transport costs.
The National Credit Regulator’s (NCR) acting manager for education, Kedilatile Legodi, said consumers should remember that credit is expensive, and they should only borrow when it is absolutely necessary to do so, and only from credit providers registered with the NCR.
The NCR has advised credit consumers to understand the total cost of the credit they are applying for before signing on the dotted line. This includes interest, once-off initiation fees, monthly service fees, credit life insurance, among others.
To understand the cost of credit, consumers should be given a pre-agreement statement and quotation that disclose the total amount repayable for the money borrowed inclusive of related costs at the end of the repayment period.
“These documents are valid for five business days and intended to assist the consumer to shop around for better deals and make an informed decision,” Legodi said.
According to the National Credit Act, consumers have a right to receive information in plain and understandable language, and to receive reasons from the credit provider why their credit application may have been declined.
Consumers are also advised to be cautious of unregistered credit providers. “Unregistered credit providers usually charge excessive interest rates that are not in line with the NCA, do not conduct affordability assessments and use unlawful and prohibited tactics to collect on their debt such as retaining consumers’ identity documents, bank cards/pin numbers, Sassa cards and others”, Legodi said. It is the consumer’s obligation to be truthful and honest when applying for credit by disclosing all relevant and correct information regarding their financial status.
“Credit that is granted based on incorrect financial disclosure by the consumer may lead to inability to repay the debt resulting in financial distress”, he said.
NCR tips on include:
Never agree to pay any upfront costs/fees. Many consumers are duped into paying upfront fees labelled as “admin fees”, “lawyer’s fees”, “release fees”.
Borrow only when it is absolutely necessary to do so and avoid borrowing money for consumables such as groceries.
Do not sign a blank credit agreement/document; read the content first, understand, ask relevant questions and when satisfied sign.
Consider credit insurance, familiarise yourself with the terms of this to avoid surprises when you most need the cover from the insurance. Credit insurance can be a life saver when you cannot repay the debt for reasons such as unemployment, disability.
Pay debts on time. Paying late or not paying the full instalment will negatively affect your credit rating and possibly your ability to take out credit again. If you think you cannot meet your monthly instalments, contact your credit provider to try to re-arrange payments. Do not wait until you skip payments.
“Only borrow when it is absolutely necessary to do so Kedilatile Legodi NCR acting manager for education
borrowing money