MANAGE YOUR DEBT THIS YEAR Borrow money responsibly and wisely and only for what is strictly necessary, says Mpho Ramapala of the National Credit Regulator (NCR), South Africa. She says it is typical that consumers spend a lot of money during the festive season, celebrating with family, going on holiday and other festive activities and forget to budget for the New Year. Some consumers dont usually plan for expenses that they will face in January such as education expenses for children and other important household expenses. It is at this time that consumers seek loans to cover these expenses. Ramapala points out that often, at this time, consumers are desperate for financial assistance and may take out loans recklessly. Ramapala advises that people who find themselves in this situation should borrow responsibly, and avoid resorting to unregistered credit providers. Sometimes the only solution for people who were unable to save for the New Year is to take out credit to fund New Year expenses. January can be a difficult month to get through as many people are paid earlier in December and then have to wait longer until their next pay cheque in January, which results in many consumers being financially strained over this period. We hope that consumers have avoided the trap of borrowing money to pay for their festive season celebrations, but if they did borrow money it is important to manage their repayments carefully, said Ramapala. Tips to help you manage your debt more responsibly this year: • Borrow as little money as possible. Borrowing to fund your childrens 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. • 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.
Posted on: Tue, 13 Jan 2015 05:48:10 +0000
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