Useful tips to borrow money wisely
When you are booking a holiday you tend to shop around for the best hotel deals on the market, so why wouldn’t you do the same when you’re looking for a loan? Credit providers in South Africa are regulated under the National Credit Act and a comprehensive list of registered credit providers can be reviewed by consumers at the NCR website. You can also shop around online by visiting lender websites to understand more about what they offer as well as interest rates and fees that they charge. Try to look for the lender’s credit provider number (often found at the bottom of the page) and never take out a loan from a lender who is not registered.
Always read the loan agreement
Once you have found a lender, you can apply for a loan online under the National Credit Act. A loan should provide a clear outline of the loan agreement prior to getting you to sign. The agreement will highlight all costs associated with borrowing money from the lender. These costs will vary between from lender to lender and can include such things as; interest rates, monthly service fees, one-off initiation fees, credit insurance fees and a required deposit. The agreement will also outline the number and frequency of repayments highlighting the first and last dates payments are due. We strongly advise that you carefully read through your agreement prior to signing for your loan. It will help you to understand exactly what is expected of you and the actual cost of borrowing. If you do not understand part of the loan agreement, ask the lender to clarify the information before to signing. Ignoring the loan agreement is never a good idea as it could lead to unexpected costs and inability to meet the repayments.
Other useful tips
We have also noted down some other tips to help you borrow wisely and to not default on any repayments once you have agreed to take out the line.
- Borrow money when necessary and do not over-extend the line of credit. For example, taking out a loan to help manage cash flow when you receive unexpected bills can be a good idea, however, borrowing to afford luxury holidays can lead to further debt.
- Create a monthly budget and know what your income and monthly outgoings are. Monthly outgoings are any costs each month, for example, groceries, bills, fuel, rent etc. This will help you understand how much money on a monthly basis you will be able to repay on any new line of credit that you take out. If by taking out a loan it causes your monthly outgoings to surpass your monthly income, it is likely you will struggle to repay your debt.
- Try to borrow over as short a time period as possible. Borrowing over a longer time period may reduce the monthly repayment amounts but you will end up paying more in total. You can use the Friendly Finance loan calculators to help work out what the total cost of borrowing will be and what your monthly payments will come to.
- If you take out credit insurance on the loan, be sure to fully understand the terms and condition, as you do not want any surprises when the time comes that you actually need the insurance.
- Check your credit rating regularly. Your credit score will affect the amount of money you can borrow and the interest rate the lender will charge you. By checking your credit rating regularly you’ll be able to identify any errors that could affect your ability to take out a loan or get lower interest rates.
- Always make your repayments. Failure to make a payment can lead to additional costs and interest being charged by the lender. Further failure to make further payments may result in legal action taken against you and a negative effect on your credit rating.