Many people start off the year promising that they will get gym fit… And, for many, this resolution has already been forgotten along with the expensive trainers hiding at the back of the shoe cupboard. But, getting – and staying – financially fit throughout the year is a resolution we should all stick to.
Financial fitness is partly about budgeting and saving, and partly about understanding and managing debt. This is especially important when you may be considering borrowing money for unexpected expenses like big medical bills.
When it comes to personal loans, revolving credit, and other types of debt, financial fitness starts with understanding the terms and conditions. If the lender does not provide terms and conditions before you commit, it could mean that they are not a registered credit provider and that their offering may not be in line with legal requirements. This, in turn, could leave you open to interest rates and payment terms that are difficult to meet.
It is easy to check whether credit providers are registered: they must include their registration number, which starts with ‘NCR’, on all their communication, and the National Credit Regulator can confirm whether it is valid.
Understanding the terms and conditions will also help you understand the real cost of a loan. A proper breakdown should include:
- The interest rate being charged, and whether it is fixed for the loan term or likely to change.
- Your total monthly payment.
- Whether the lender can decide to increase the interest rate at any point in time.
- Any penalty fees that will be charged if you miss a payment.
- Any additional initiation (starting) and admin fees.
Then, it is vital to understand how the lender will communicate with you. Credit agreements can be changed occasionally, but the lender must tell you about any changes before they implement them. Keep an eye out for letters, emails, and messages, and ensure that the lender always has your most up-to-date contact details. Lenders only have to show that they have sent a letter. They do not have to prove that you have opened or read it; this is your responsibility.
Another thing to check is how easy it is for you to contact the lender. Do they respond quickly and meaningfully to WhatsApp messages and emails? Do they answer if you phone their call centre? Is their website or app easy to use? If not, think twice.
Being financially fit means feeling confident and secure about your financial situation. Doing some research and reading the terms and conditions before committing to a loan can mean the difference between flexing real financial muscle and being trapped under a weight that is too heavy to lift.
*Seyuba is the head of people at digital financial services platform, FinChoice.
PERSONAL FINANCE