Top 5 things to consider before taking on further credit

By Staff Writer

Nowadays, the process of attaining credit has become easier and faster. Although applying for, and receiving cash on the same day may excite potential lenders, it doesn’t come without serious repercussions if you’re not wise. 

We should never become complacent in signing a credit agreement, since the terms and conditions, if not read and understood, could result in financial pitfalls that may be hard to emerge from. Remember, once you sign on the dotted line, you have accepted the repayment of the sum borrowed, the interest rate, the term of the loan, and all terms and conditions become binding.

IDM Group expert, Pieter Wasserfall, noted five things to consider before taking on further credit.

Tip: For a personal loan at competitive interest rates click here.

Distinguishing between a ‘need’ and ‘want’

Before making the decision to apply for credit, it is crucial to review your reasons. If you need to urgently pay a medical bill, or make a business purchase that may generate income, or even make a payment towards funding your studies or paying school fees, credit may be unavoidable. However, if your expense relates to entertainment, it may be a wise decision to reconsider.

Understanding credit types

Understanding your financial situation and the reasons for wanting to attain credit will help you select the best credit type for your circumstance. Consumers tend to look at the monthly amount, without considering the interest payable over the term. Unsecured loans tend to have higher interest rates since there is no asset attached to the credit. Shop around for the best interest rate before making a decision. 

READ MORE: 5 Ways to borrow: Choose carefully

The fine print

Pay particular attention to the interest rate, service and admin fees, and any additional costs that may be hidden at first. Ensure that your monthly instalment is inclusive of all charges so that you are not paying more than you planned to, and you’re not left with any nasty surprises when it’s time to pay.


Reputable creditors will conduct an affordability assessment before you are granted the loan, to ensure that you are able to comfortably pay the instalments. However, do not take for granted that this will happen with the best interests of the consumer at heart. Your budget should guide you, and only you will know what your affordability bracket is. Just because you have been granted the amount you asked for, do not use all of it unless it is necessary.

Conduct your own research

Request quotes and compare them to make sure you are getting the best deal. Desperation can often trigger action mode, but with a little bit of patience, you may be saving yourself future costs.

Although time-consuming, proper financial planning and discipline is vital. It could mean paying a lower instalment, a lower interest rate and could provide you with the peace of mind you deserve.

Wasserfall says you must be careful not to get trapped in a debt cycle.

“Before you take another loan, it’s important to pay off any existing debt. Many people get entangled in a web of debt because they lack credit management skills. They max out their credit cards, and they borrow for the wrong reasons. Before they know it, they have accumulated more debt than they can afford. If you have to borrow to cover your daily expenses, know that you could be overindebted, in which case you should seek professional help.”

Wasserfall advises that you could also consider consolidating your debt for better management.

“Consolidating your debt will reduce the risk of falling behind with payments. In addition to this, you’ll pay lower instalments, removing the stress and burden of making multiple payments to different creditors.”

To find out how JustMoney can help you consolidate your debt, click here.

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