Plan in advance for repayment

2016-03-24 06:00
OPINION mpho ramapala

OPINION mpho ramapala

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South Africa is one of the most indebted nations in the world. The average South African citizen uses 75% of their income to pay off their debt . . .

Borrowing money is risky if you haven’t planned it out first.

Mpho Ramapala, education and communication manager at the National Credit Regulator, said it was often too late by the time people realised they should have paid more attention to planning their finances.

But some people are living desperate lives that see them take out loans recklessly. She said people should plan in advance how to repay their loans and most importantly determine whether they can afford the repayments. Only then they should borrow money from registered credit providers and only borrow when they need to.

Before taking on more debt, she said, people should take into account all their debts – including store and credit cards, personal loans and other commitments. “Plan to pay off as much debt as possible before taking on more credit. Honour your credit agreement and payments,” said Mpho. Under the National Credit Act, it is your right as a consumer to be given a “pre-agreement statement” and quotation when seeking credit. These outline the terms and conditions of the proposed agreement and all costs involved such as interest charged; monthly service fees; once-off fees; credit insurance, if there is any; a deposit if required; the number of instalments; the dates of the first and last instalment and others. This means that people will know what’s expected of them before signing up for the credit. In addition, they will be aware of the cost of credit, and the terms and conditions before signing the actual credit agreement. If there is anything they don’t understand, they must get advice before committing themselves. Never sign blank credit agreements as you won’t have control over other information which can be added afterwards. Mpho advised people to check the interest rates they will be charged, as well as other charges. For example, when taking out unsecured credit which consists mainly of personal loans, the credit provider may charge a maximum interest rate of up to 33,75%. However, people can negotiate for lower interest rates based on the pre-agreement statements and quotations. “These can be used to shop around for better deals. In addition, maintaining good credit records may benefit consumers by getting better interest rates when buying on credit,” she said.

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