By Nico Strydom
Credit can come in handy if you use it responsibly, but statistics also show that countless consumers find it difficult to manage their credit.
Nomsa Motshegare, chief executive of the National Credit Regulator, says there are many reasons for consumers to lend money. “Consumers must, however, make sure they understand the cost of credit and the terms and conditions of different credit agreements before they take up credit.”
According to Motshegare credit providers should give the consumer the necessary documentation in which the terms and conditions are set out together with the relevant costs, such as the cost of credit, the interest rate, service fees, initiation fees, credit insurance, whether a deposit is required, and the number of instalments.
In terms of the National Credit Act credit providers must do an affordability assessment before granting a consumer credit. The purpose of the assessment is to evaluate the consumer’s general grasp of the risks and costs of the proposed credit. “It is also to look at the rights and liabilities of a consumer in terms of the credit agreement, to check the consumer’s debt repayment history as a consumer under credit agreements, and to look at the consumer’s current financial means, prospects and obligations.”
Motshegare also says consumers must be honest when they supply information for an application for credit in order to enjoy the protection of the National Credit Act. “Before signing an agreement, consumers must make sure of the interest rate and any other costs that will be levied”.
Motshegare has the following hints:
Borrow as little money as possible ─ perhaps it is good if you borrow money for your child’s education or a house, but to borrow money for things such as groceries of luxury vacations can result in a lifetime of debt.
- When you sign a credit agreement, make sure all the necessary information appears on the agreement so that it will not be possible to add more information after you have already signed.
- Make sure you are familiar with the terms and conditions of the credit agreement.
- It is advised that credit insurance be taken out.
- Draw up a monthly budget and adhere to it ─ make sure that you will be able to pay your new debt after you have covered all your other expenses.
- Try to save money.
- Pay your debt on time, otherwise it could affect your credit rating.
- Regularly check your credit report so that you can identify errors.
National Credit Regualtor: http://www.ncr.org.za/