Very few people go through life without ever having to borrow money. Who has the cash to buy a house, or to fund tertiary education? But here’s what to do when you need a loan.
- Borrow as little money as possible.
If you need R4 000 to pay your taxes, or your kid’s school fees, don’t be tempted to borrow more than that to ease your general financial burden right now. Borrow just what you need, otherwise later repayments could be crippling.
- Choose the institution carefully.
Make sure the place you borrow from is a registered financial institution. They have to operate according to certain rules and regulations and interest rates are fixed. Compare banks and see where you can get the best deal.
- Stay away from loan sharks.
Going down this road can be the beginning of years of financial misery, as many of these moneylenders charge huge interest rates. It is very difficult to escape from this cycle, especially when you end up having to borrow more to pay for life’s necessities as there’s nothing left once you have paid the loan shark. Don’t ever let anyone take your bank card and your ID book.
- Borrow just for certain things.
Borrowing to fund your children’s education or a home loan can be a good thing, but unless there is a once-off crisis, try never to borrow money to pay for consumables, to pay off other debt or to fund luxuries. An expensive holiday or designer clothing can condemn you to a lifetime of debt.
- Plan the repayments beforehand.
Before you apply for a credit card, store card, overdraft, personal loan or any form of credit plan carefully on how you are going to pay this back. Also take into consideration the interest and other charges, as well as how this will affect your ability to save. The longer you take to settle a loan, the more it will cost you.