Consumers warned not to borrow after December
Consumers have been advised to borrow money responsibly and wisely, around this time of the year.
“Borrow money only when you need to, and most importantly, plan in advance how you will repay the loan and whether you can afford it,” Senior Manager: Education and Strategy at the National Credit Regulator (NCR), Peter Setou said on Wednesday.
According to Setou, failure to plan and budget for the essentials in the New Year such as school fees and stationery, uniforms, rent and transport can leave consumers in an untenable position.
“Consumers often find themselves with no option other than to apply for credit. This may result in taking loans irresponsibly which may in turn lead to over-indebtedness.
"This entails borrowing money without planning how to repay the loan, borrowing money from unscrupulous credit providers, signing loan contracts they do not understand and eventually finding themselves in worse financial predicaments," said Setou.
According to Setou, it is paramount that consumers should be familiar with their rights as borrowers in order to protect themselves from unscrupulous lenders.
To this effect, the NCR has issued the following guidelines for consumers to consider for borrowing responsibly and wisely:
· Remember that loans cost money. Only borrow what you need. Make sure that you can afford to repay the loan or credit you have taken out and still meet your necessary living expenses to avoid being caught in a debt cycle.
· Compare interest rates and other costs from different credit providers. Always ask and make sure you understand what the total monthly payment, including insurance and all other charges are. Avoid paying over too many months; it will cost you more in the end.
· Plan the repayments before you apply for credit card or overdraft. Also take into consideration the interest and other charges as well as how this will affect your ability to save.
· Always ensure that you fully understand the terms of the agreements before you sign.
· Avoid signing any blank documents when applying for a loan. The credit provider might add information that was not agreed upon.
· Avoid taking on more credit or borrowing from one credit provider to pay another as this may lead to a debt trap.
· Most importantly, talk to your credit provider if you encounter problems with your repayments.
According to the NCR website, the regulatory was established under the National Credit Act 34 of 2005 (the Act) and is responsible for the regulation of the South African credit industry.
It is tasked with carrying out education, research, policy development, registration of industry participants, investigation of complaints, and ensuring enforcement of the Act.
The Act requires the NCR to promote the development of an accessible credit market, particularly to address the needs of historically disadvantaged persons, low income persons, and remote, isolated or low density communities.
The NCR is also tasked with the registration of credit providers, credit bureaux and debt counsellors; and enforcement of compliance with the Act.
Article published courtesy of BuaNews
