Given the financial pressure on our pockets, it’s understandable that many South Africans are looking to loans as a solution for money woes. But debt, while undoubtedly very helpful, is expensive, and can come with its own problems – which is why it must be considered very carefully.
For instance, a loan is advisable only if you are seriously battling to cover your monthly expenses – luxury items don’t count, no matter how much you want them. The same goes for unbudgeted expenses. If you truly believe that you aren’t going to make the month without a loan, you need to try and detach yourself from the emotion of the situation: make sure that you can afford the loan, and that it covers all necessary expenses. Don’t give in to the temptation to take out more than one loan so that you have more funds available, because you may struggle to repay them all.
Speaking of repayment: it’s best to pay off your smaller debts before tackling the large ones – you can then add the money that was previously used for those small loans to your monthly instalments so that the debt is paid off more quickly. If, on the other hand, you find that you aren’t managing your monthly instalments, ask your credit provider about more affordable repayment solutions – don’t simply stop paying, as this will affect your credit record.
Finally, ask your credit provider about credit loan insurance, so that you will be covered in case you are retrenched or can’t work because of disability (whether short-term, permanent or temporary).