The National Credit Regulator (NCR) has urged the public to start 2021 on a good note by spending and borrowing wisely.
In a statement, the NCR said some consumers are
currently finding it difficult to meet their financial obligations such as
school fees, school uniform, transport and rent, among others.
“It is that time of the year where some
consumers will feel like ‘Januworry’
is three months long because of their financial situation. Consumers who might
need to borrow money or take out credit should read and understand their credit
agreements before signing,” said the regulator’s Acting Manager: Education and
Communication Anne-Carien Du Plooy.
According to the National Credit Act (NCA),
consumers have a right to receive information in a plain and understandable
language and to receive reasons from the credit provider if their application
is declined.
“If all registered credit providers decline
your application, it means that there is a problem prompting a need to work on
your finances as your financial woes might be bigger than you realise. This is
the time to seek assistance by negotiating for lower instalments with your
current credit providers, paying off and closing some accounts.”
This can be done through the downgrading of
one’s lifestyle and also through budgeting when one can check what one can
eliminate as well as what can be downgraded.
Du Plooy urged consumers to avoid unregistered
credit providers such as “mashonisas/skoppers” to access credit as they will
pay dearly at the end.
“Unregistered credit providers charge
exorbitant interest rates and use other illegal collection mechanisms such as
card retention. Consumers should not agree to pay an ‘upfront fee’,” warned Du
Plooy.
The fee is charged mostly by unregistered or
even fake credit providers before they give the consumer the money they are
applying for.
The fee also has several names such as
attorney’s fees, release fee and admin fee.
In terms of the National Credit Act, it is
illegal for a credit provider to make a consumer pay them upfront.
“Consumers should not confuse this with a deposit as there is no deposit when taking out a loan. The bottom line though, is that the prospective credit provider will never give you the money you are requesting, they will suck you dry before they vanish. Know your rights and spare your money,” she said.
The NCR also shared the following tips with
consumers:
·
Understand the cost of credit.
The cost of credit includes interest rate, once off initiation fees, monthly
service fees, credit life insurance, etc. To understand the cost of credit,
consumers should be given a pre-agreement statement and quotation (valid for 5
business days). These should disclose all the costs involved in the credit
agreement that a consumer signs.
·
Do not sign a blank credit
agreement/document - read the content first, understand and ask relevant
questions. You may sign ONLY when satisfied.
·
Be honest and truthful when
applying. If you are dishonest about your monthly expenses when applying, you
will lose the protection offered in the National Credit Act if you need to raise
reckless lending in the future.
·
Borrow only when it is
absolutely necessary to do so and avoid using credit for consumables such as
groceries.
·
Understand credit life
insurance - Familiarise yourself with the terms and conditions of the credit
life insurance to avoid surprises when you mostly need the cover from the
insurance. Credit life insurance can be a life saver when you cannot repay the
debt for reasons such as loss of income, unemployment, disability etc.
·
Pay your debts on time -
Paying late or not paying the full instalment will adversely/negatively affect
your credit report and in turn your ability to qualify for credit in the
future. If you think you cannot meet your monthly instalments, contact your
credit providers immediately and try to re-arrange payments. Do not wait until
you skip payments.
·
Check your credit report
often- You are entitled to a free credit report once a year.
Done By: Mitchum George
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