Hello and welcome to our new series! In our previous series ...
In our previous series we learned about the Credit Application process. This includes the rights and responsibilities that you and a credit provider have, the criteria that credit providers look at to determine affordability, how applications are reviewed, what necessary expenses are, and what the pre-agreement and quotation should contain.
We also looked at a checklist that you need to tick off before you apply for credit.
For the next 3 weeks,In this series, we are going to talk about your responsibility in terms of a credit agreement.
Definitions of the week: PROOF OF ADDRESS
A proof of address is a document that proves that you live at the residence you have listed on your credit agreement. The proof of address should have your name (or initials) and surname on it. Examples of acceptable proof of address would be a municipal account, a rental agreement, etc. a utilities bill (such as your telephone or internet account) or another credit statement (such as a retail account).
In today’s lesson, we will talk about the information that should be contained in and explained to you when you sign a credit agreement.
Payments: The agreement should show when and how payments will be made, the number of payments, and the date of the first and last payments.
Security: If you are taking out secured credit, such as vehicle financing or a home loan, information on the asset must be in the agreement, as this asset will act as security for the cost of the loan.
Insurance: You need to take out insurance for an asset bought with secured credit. The credit agreement should contain:
• the monthly insurance premium (payment) amount,
• a description of when and for what an insurance claim would be paid to the lender (the credit provider),
• the type of insurance, and
• any fees or commission paid to the credit provider.
Statements: The credit agreement should state when and how you will receive statements, for example, monthly via email.
Default administration costs: The agreement must state when administration costs will be charged after you default, and what the amounts would be.
Right to terminate: You have the right to cancel your credit agreement at any time. The conditions of termination must be in the credit agreement, (for example, having to pay back the loan or return an asset).
Early settlement: If you want to settle the amount owing before the credit term is over, the agreement will state your rights and responsibilities for this.
Addresses: Your credit agreement must contain all the addresses for receiving documents, including for receiving a Section 129 letter, which is a notification letter that a credit provider sends when you are in default. The credit agreement also states that you must notify your credit provider if your personal information changes.
Penalty interest: The credit agreement must state how much penalty interest will be charged on credit instalments in arrears.
Marketing option and annual increases in credit limits: Your agreement should state that you may refuse to be included in any telemarketing campaigns, marketing, consumer lists, or mass distribution. You may also state whether you want your credit limit to increase automatically each year.
The right to apply for debt counselling: The credit agreement should state that, if you can no longer afford to make your monthly repayments (for example, due to over-indebtedness), you have the right to apply for debt counselling.
The rights of the credit provider: The credit provider also has rights, which will be listed in your credit agreement. These include the right to enforce the credit agreement or recover assets from you if you default.
Information reporting: The credit agreement must contain information about the credit provider reporting your data to credit bureaus.
Helpful Hint: You have the right to ask a credit provider any time for a statement containing: your current balance, all amounts debited/credited, overdue amounts, and amounts currently payable. You can see a list of your accounts, balances and instalments on your credit report at www.mycreditcheck.co.za.
This was Part 1/3 of a series about the responsibilities of credit. Come back next week to learn about making payments in terms of your credit agreements.