Knowing Credit: Managing your Credit [Part 2/2] Responsible Loan Use

Welcome back! In our last lesson, we discussed how to manage your credit responsibly. We discussed secured credit (such as a home loan or vehicle financing) as well as unsecured credit (such as a credit card or overdraft facility).

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Definitions of the week: DEFAULTING When you default on a payment, it means that you do not pay the instalment as per your credit agreement. Defaulting is therefore the failure to fulfil a promise or responsibility that was previously agreed on.

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In today’s lesson, we will talk about being responsible for a loan. Loans are taken out for a specific purpose, like paying a deposit on school fees, buying a computer or TV, or paying for a wedding or a holiday. With a loan, the credit provider gives you the agreed amount, and you need to pay that amount back in instalments, until you have paid in full. The instalment amounts and intervals are set out in your credit agreement. Here are some tips to help you to manage your loan responsibly:

• Check your budget each month, and adjust it if you struggle to pay your instalments. You may have more money available if you reduce unnecessary costs, such as takeaways or movie tickets.
• Whenever you can afford it, pay more than your instalment amount. This will bring down your interest rate, and you will pay off your loan sooner.
• Make sure to pay your instalments on time, or you could be charged for defaulting, and also have to pay interest on the defaulted payment.
• If you think you can’t pay an instalment (for example, if you’ve spent money on a family emergency), contact your credit provider immediately. You may be able to negotiate a new arrangement with the credit provider.
• If you are allowed to choose how to pay your instalments, choose a method that suits your needs and is convenient.

Credit providers usually make you pay your instalments via debit order. If yours doesn’t, consider asking to have one set up. Some of the advantages of paying via debit order include:

• It’s convenient, as the money is collected directly from your bank.
• You can view your payment history and easily trace payments.
• You don’t have to worry about paying your bills yourself.
• You’re unlikely to forget to pay or withhold an instalment.
• The instalment is always collected on the same day each month.

Helpful Hint: Although debit orders are very convenient, they have some drawbacks. If you don’t have enough funds in your account when a debit order is deducted, you will be charged a penalty fee. Always make sure you have enough in your account around the time your debit orders go off. Banks also charge a small service fee for debit orders. This brings us to the end of our course on Knowing Credit: Managing your Credit. In our next series, we will discuss query resolution, logging disputes, feedback and timelines of disputes, and how Compuscan handles disputes and queries.

Stay tuned for our next series, Knowing Credit: Query Resolution.