With over-indebtedness stifling many consumers, it’s important to remember that you should always borrow wisely.
Debt review or debt management is an option for some – those who manage their credit properly can borrow freely, but they should still remain cautious.
If you are considering taking out a loan or a credit card, it’s important to keep the following handy tips in mind.
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 consumables such as 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. Plan the repayments before you apply for a credit card, clothing card, overdraft, personal loan or any form of credit. Also take into consideration the interest and other charges as well as how this will affect your ability to save. Avoid paying over too many months as it will cost you more in the end.
If there is, familiarise yourself with the terms of the insurance to avoid surprises when you most need the insurance.
Make sure that you honestly 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.
Start saving consistently
Put aside at least 15% of your income every month in a safe investment. Save for your retirement as well.
Pay your debts on time
Paying late will adversely affect your credit rating 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.
Prioritise your home loan
You don’t want to lose your home
Check your credit report regularly
This way you’ll be able to identify any errors and correct them. Under the NCA a credit bureau must provide you with one free copy of your credit report each year from each of the eleven registered credit bureaus. Additional copies cost R20 excluding VAT each.