2015’s guide on handling debts more responsibly

2015 has just begun and the only solution for people who were unable to save for new year is to take out credit to fund new year expenses.

Acting manager for Education and Communication at the National Credit Regulator (NCR) Mpho Ramapala advises consumers to plan in advance on how they will repay their loans. Ramapala shares a few tips on how consumers can borrow money responsibly and wisely.

• 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, to pay off other debts 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, store 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 credit insurance, familiarise yourself with the terms of the insurance to avoid surprises when you most need the insurance.
• Be honest – 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 (NCA).
• 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 have 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.
• Save some of your income every month.
• 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.
• Check your credit report regularly – this way you will be able to identify any errors and correct them. Under the NCA you are entitled to one free copy of your credit report each year from each of the NCR registered credit bureaus.