Personal loans – beware of the Potholes!
In this week’s blog, Consumer Debt Support (CDS) and our business venture partner Debt Eezy, have come to realize that overall, consumers lack the understanding of how a personal loan payment term and the interest rate thereof, are put together in a contractual payment plan. So we would like to share or educate you on how to plan ahead and mind the potholes on this road!
Don’t let your Reason override caution
Without proper personal financial planning, a void in your expenses can occur, it can be unforeseen costs, emergencies, extra urgent family needs…there are countless reasons but not always the budget for it.
Caution: When in a rush, you don’t see the potholes
When you act on an impulse decision and the bank process your application for a personal loan, through all the calculations in your head and on your notes, there is a list of very important factors to keep in your mind:
Don’t be afraid to ask…
- What is your credit score at the bank, it will affect the interest rate score on your repayment terms.
- Alternatively, submit a printed copy of your personal credit rating that is recorded by your creditors on how you maintain your monthly payments on all your credit agreements and service agreements.
In one of our previous blogs, we mentioned that consumers can get a FREE credit report on their birthday from one of their selected credit bureaus.
Quick access to your credit score got to https://www.clearscore.com/za/
- Ask the lender about the repayment terms and the interest rate over that period
- If your score was acceptably good, will it reduce the interest rate charged?
- What is your affordability outcome on the repayment term on your budget?
- Submit your detailed budget and make sure no expenses on your application were overlooked, it will affect the quotation of the loan repayments.
- Can the lender extend the repayment term for you, should you struggle to pay the loan if you come into some employment trouble?
- Can the lender get you a lower interest rate if you increase the amount you lending?
- What happens if you come into some extra money and settle the loan earlier?
- What is the cost of the credit life insurance on the amount you are lending?
- Can you the consumer shop around for a cheaper credit life insurance quotation that will reduce the premiums of the repayment plan?
What is a consolidation loan and is it a good idea?
Essentially you apply for a sizable loan, to pay off all your creditors, and then make monthly repayments on that loan. If you have a good credit score, it may be approved, if you don’t, it won’t, and you need to improve your credit behaviour to bring your score up.
In most cases, these loans put the consumer into the over-indebted disposition and become unaffordable to pay back. We see it in our practice that consumers ignore the above due to the financial need to get the money for the personal need at that point of taking out the loan.
The lack of understanding of how these things work is one factor that many consumers fall prey to on the repayments that become a serious financial burden very soon after signing for the said loan.
Who settles the creditors when a consolidation loan is considered?
If you applied for a consolidation loan and it gets approved, you need to find out from that institution who settles the creditors with that loan. It will affect your credit score either way so consider it very important to get statements of “paid in full” from your listed creditors who received the outstanding balances from the person in charge of it.
Shop around and compare apples with apples
You need to take the time to compare your best options with different banks. Like you do
when you want to invest in a car or a house, you don’t go for the first and best deal? To apply for such a loan or any extended credit, you need to be sure of your necessity and your affordability.
In our modern age and lifestyle, loans are not so simplified anymore, too many people defaulted on their payments and the laws became much more intense.
If you don’t practice a responsible capital investment and payment plan from your income, sooner than later you will fall victim from your own desperation to avoid default and will hit the pothole of over indebtedness.
Options on your property
When consumers want to put a value to the amount they are going to borrow, some homework and costing are needed to be done that will ensure one does not overexpose oneself with a home loan that becomes a monthly burden when looking at the repayment term and affordability.
- Owning property one often has to weigh up the options of doing renovations to sell. In this difficult economy, many consumers are opting for much-needed upgrades.
- In this instance, property improvement is a great investment when looking at the cost of the loan to increase the value of the property in order to get capital to pay your creditors.
Let us advise you before you hit the potholes!
When you realize that you can no longer cover the shortfalls in your take-home pay, it becomes a question whether you should seek help or sound advise, rather than opting for a new personal loan. Visiting one of our offices or leaving your details on our contact us page, by a mere easy quick few steps assessment telephonically, we can help to restructure your debt into one affordable payment without you taking out another loan.
We specialize in helping consumers that are struggling to pay their monthly bills and default on their credit agreements. Debt can become stressful when you get caught up in the month to month debt monster that eats your hard-earned pay before you can provide for you or your family’s basic needs.
We have better options…
…and will show you how we work your debt into small pieces, structure it to your budget and give you more on your balance to live easier.
We offer Debt Review services and Debt voluntary distribution.
Tip of the week: Always deal with registered debt counseling practitioners registered with the National Credit Regulator (NCR).
Visit www.debtcentre.co.za/contact-us/ complete the easy form and submit it. One of our joint call centre agents will contact you and schedule a time for the appointment.
Visit www.debteezy.co.za/contact-us/ compete the easy form and submit it. One of our joint call centre agents will contact you and schedule a time for the appointment.
Our staff can help you with a telephonically assessment in less than 5 minutes of your time for an outcome of how we can lower your debt repayment.
Consumers are under severe financial strain and pressure to cover day to day living costs and debt repayments at pay-day. The most common negative survival and biggest pothole is to make another loan to get through the tough time, just to realize after 6 months nothing had really changed in their personal circumstances. One thing did, ANOTHER DEBT REPAYMENT added to an already overburdened debt payments.
Message from the author: Annienne Nel
So many of us lack the funding in personal financial growth. Increase your knowledge and educate your family in a group effort to become financially responsible. It will assure you stability and a better credit score at the end of the day, a positive investment towards your future in capital growth and personal development ensuring better understanding towards your career.
I understand the stress consumers face in this difficult economy with rising unemployment. I will go out of my way to educate and fight your war on over indebtedness. You need me in your corner, with God as the Head of my business you will be in good hands.