NCR urges consumers to borrow responsibly

"Only borrow what you need. Do not take out credit for things you can pay cash for or those that you can save money for and pay cash at a later stage," says Peter Setou, senior manager: education & strategy at the NCR. "Buy assets that appreciate, like a home or add to life, such as education but borrowing for a holiday, designer clothes or a flat screen television is a definite no.

"Consumers should request a pre-agreement statement and quotation and ensure that they understand the content and the total monthly payments including insurance and all other charges before signing. Get quotes from different credit providers before signing and compare.

In line with the National Credit Act (NCA), credit providers should conduct an affordability assessment before granting you credit to make sure you are able to pay back the money. Be honest with the information you provide, as this process is there to protect you.

Insure against disaster

Covering unexpected costs, such as car repairs if you're involved in an accident or funeral expenses when a loved one dies, can tip you into a bad debt situation. Your ability to pay back your debt may also be affected if you become disabled or seriously ill. Should you die unexpectedly, your family could be left with the responsibility of paying back huge amounts of debt. "Consider taking out insurance to cover these events, which means you pay a little each month but are covered if disaster strikes," advises Setou.

If you find yourself running into financial trouble, you should try to negotiate a repayment plan with your credit provider first. If this is unsuccessful, you are entitled under the National Credit Act to contact a registered debt counsellor to help you tackle your debt. This involves certain fees and you will not be able to access further credit whilst under debt counselling.

Borrowing tips:

• Make the loan term as short as possible
  
• Don't be tempted by attractive deals on new credit cards such no fees for a set period of time or points and benefits offered if you spend on your card. All debt carries a cost eventually.
  
• Take advantage of the low interest rates to pay off as much debt as possible. Prioritise your home loan during this time. You could save thousands in interest costs over the longer term.
  
• Shop around and compare interest rates and other costs from different credit providers before entering into an agreement, use the pre-agreement statement and quotation to assist you to compare.
  
• Read the small print. Understand each clause and ask for help if you don't understand certain terms and conditions. Remember it's your right to be given documents in a plain and understandable language. This means that the contents, meaning and importance of the document must be easy to understand.
  
• Be aware of "no deposit" deals, which can work out to be highly expensive over time.
  
• Be aware that interest and fees are regulated by law, so check the interest rate you are being charged.
  
• Start saving consistently and seriously for your retirement years from the day you start working. Put aside at least 15% of your income every month in a safe investment.

For more information go to www.ncr.org.za.