By Nico Strydom
The first two months of the year, which usually put a great deal of pressure on consumers’ finances, are already history. However, some consumers are still struggling to meet their financial obligations.
“Consumers who are forced to borrow money or take out credit must, however, understand credit agreements before signing them,” says Anne-Carien du Plooy of the National Credit Regulator.
According to the National Credit Act, consumers have the right to receive information in language that is clear and understandable and, if their application is rejected, to get the reasons for it from the credit provider.
“If all registered credit providers reject your applications, it means there is a problem and it is time to deal with your financial affairs as your financial problems may perhaps be bigger than you realise,” Du Plooy says. “That is when the time has come to get help by negotiating lower instalments with your credit providers and to pay off and close some accounts”.
Consumers should also be on the lookout for unregistered credit providers as using their services could cost them dearly later. Unregistered credit providers charge exorbitant interest rates and use other unlawful mechanisms for collection. Also, consumers should not agree to pay a fee upfront as unregistered or even fake credit providers tend to charge such a fee.
Du Plooy warns consumers to be aware of the cost of credit too. This includes interest, start-up fees, monthly fees and credit protection insurance. “Documents must be read carefully at the outset. Make sure you understand the contents. Ask questions if necessary and only sign the agreement once you are satisfied”.
The onus also rests on consumers to be honest when applying for credit. “If you are dishonest about your monthly expenses when you apply for credit, you will lose the protection the National Credit Act affords you. Borrow only when it is absolutely necessary to do so and avoid using credit for consumables such as groceries”.
Consumers should also make sure they understand the term credit protection insurance. “Make sure you are familiar with the terms and conditions of credit protection insurance to avoid nasty surprises when you need credit the most. Credit protection insurance can be useful when you are unable to pay your debts, such as when you have lost your income, or in the case of disability”.
Du Plooy advises consumers to always pay their debts on time as this can impact their credit record.