Responsible borrowing
It is important to borrow money responsibly so that you are able to repay your loan while keeping a healthy credit score.
What is the Consumer Protection Act?
The act provides consumers with a greater level of protection against providers of goods and services. Some of the roles of the CPA are:
- It lays down norms and standards to protect consumer
- It prohibits certain unfair marketing and business practices
- It promotes responsible consumer behaviour
Qualifying for credit vs affording
- Do a financial check
- Create a list of all your debt and monthly expenditure
- Can you afford the monthly repayments and maintain your lifestyle?
- If the answer is no, you may need to reassess your spending habits
- Make financial resolutions
If, by the first of each month, you’re left wondering where your salary went then it is time to get a grip on your finances. Start thinking with a frugal mind and make saving a habit. Set yourself goals to pay off debt by a certain date.
- Don’t make more debt
If you can’t really afford to buy the latest flat screen TV, then don’t do it. Putting food on the table is more important than keeping up with the Joneses. Rather focus on settling your current debt first. Remember to settle debt with higher interests first.
Understanding total cost of credit (CoC)
- Amount borrowed (AB) - Loan amount
- Interest (I) - What the lender will add on the amount borrowed
- Administration costs (AC) - Additional cost
- Insurance (INS) - To cover outstanding balance in case of e.g. death or disability
- CoC = AB + I +AC + INS
- Contracts: It is your responsibility to make sure you understand the contract before signing