Check everything, always
From your long-standing but clearly unscrupulous bank to Airbnb check every detail of what you’re being offered
Twenty four percent. That’s what my sister’s bank wanted to charge her for a short-term loan to fund the transfer of her existing home loan into her name. 24%!
Now let’s be clear: she has been with the same bank since the late 1980s and is fastidious about her money. Never bouncing cheques (back when cheques were a thing), never overdrawing her account and paying her bond and credit card in full and on time every month. In short, she has an excellent credit score.
So instead of being ripped off by her own bank, she went shopping for a shortterm unsecured loan. Another bank consultant suggested she simply extend her credit card limit, but again at crazy interest rates.
In the end she took money out of her bond as she’d been paying extra for the past 13 years and had plenty free cash there. This worked and with a home loan at just below prime it was less than half the 24% rate quoted. She’ll pay it back in a year, saving a small fortune on interest.
The lesson here is simple. Trust nobody, always check the small print, know what you need and want and shop around. Sure, in this case the shopping around didn’t help, but by checking the small print and refusing to be ripped off and asking questions, a better solution was found.
Now on to another warning. As I mentioned, my sister was transferring the bond into her name as it is currently a joint bond with her now ex-husband. When checking the paperwork, she found that the bank had reset the term for another 240 months (20 years) which meant a lower monthly repayment. This as the existing home loan had only seven years to run before she would have paid it off.
Of course, a lower payment every month is attractive to everybody, especially now that things are really tough. But this would have been at a serious cost on the extra interest as much as R1m over the period. When she pushed back the consultant was dismissive and told her she was being silly, stating “everybody wants a cheaper instalment”. Silly about an extra R1m of interest payments?
The bottom line is the consultant was giving terrible advice. But my sister is no pushover; she held her ground and got what she wanted, which was a sevenyear term, not 20.
The lesson here is, again, always check the details. But there is another important point. The lure of some extra money in her account every month from lower monthly repayments was attractive, but the real cost of that money was going to be enormous.
This, of course, is way beyond just banks. The same applies when buying a car or even booking a holiday.
I’ve been staying in Cape Town for a few weeks and I did as I always do. I found a great apartment on Airbnb. I then googled the place and found the owner’s website 10% cheaper.
Always be checking.