How to borrow wisely because credit is so expensive

Consumers are reminded that credit is expensive, therefore they should only borrow when it is absolutely necessary to do so, and only from credit providers registered with the National Credit Regulator (NCR).

Understand the total cost of the credit you are applying for before you sign on the dotted line. The cost of credit includes interest, once-off initiation fees, monthly service fees, credit life insurance, etc.

To understand the cost of credit, consumers should be given a pre-agreement statement and quotation that disclose the total amount repayable for the money borrowed, inclusive of related costs at the end of the repayment period.

These documents are valid for five business days and intended to assist the consumer to shop around for better deals and make an informed decision.

According to the National Credit Act (NCA), consumers have a right to receive information in plain and understandable language and to receive reasons from the credit provider why their credit application may have been declined.

Consumers are further advised to be cautious of unregistered credit providers and only borrow money from NCR-registered credit providers.

Unregistered credit providers usually charge excessive interest rates that are not in line with the NCA, don’t conduct affordability assessments and use unlawful and prohibited tactics to collect on their debt, such as retaining consumers’ identity documents, bank cards/PIN numbers, Social Security Agency cards and others.

It’s the consumer’s obligation to be honest when applying for credit by disclosing all relevant and correct information regarding their financial status.

Credit that is granted based on incorrect financial disclosure may lead to inability to repay the debt.

When borrowing money:

• Never agree to pay upfront costs or fees. Many consumers are duped into paying “admin fees”, “lawyer’s fees”, “release fees”, etc, when borrowing money from unscrupulous, fake or unlawful entities usually found online. In most cases, consumers lose their money without getting what they borrowed;
• Borrow only when it’s necessary and avoid borrowing money for consumables such as groceries;
• Do not sign a blank credit agreement or document. Read the contents first, understand, ask questions and, when satisfied, sign;
• Consider credit insurance. Familiarise yourself with the terms of the credit insurance to avoid surprises when you most need the cover from the insurance.
• Pay your debts on time. Paying late or not paying the full instalment will adversely affect your credit rating and possibly your ability to take out credit in the future.
• Create a monthly budget and stick to it; and
• Check your credit report regularly.

Advocate Kedilatile Legodi is acting manager: education and communication at the NCR.

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