Prices are up, savings are down and we’re all just scraping by and trying to avoid getting into debt. It can be tempting to turn to loans and credit cards to get through the month. But before you do anything drastic, read these tips offered by the Credit Information and Research department at the National Credit Regulator (NCR).
Before you sign up for more credit, follow these important guidelines to avoid over-indebtedness:
- 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 debt 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 you are offered credit insurance, familiarise yourself with the terms of the insurance to avoid surprises when you need it.
- Be honest. Make sure that you 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’ve 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.
- Start saving consistently. Put aside at least 15% of your income every month in a safe investment. Also be sure to contribute to a retirement fund.
- 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 installments, call your credit provider immediately and try to re-arrange payments. Don’t wait until you skip payments.
- Prioritise your home loan.
- Check your credit report regularly. This way you’ll 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 11 registered credit bureaus.
- Consumers should aim to pay off their debt and build up savings over the longer term.