Being a responsibly borrower will help you avoid getting into arrears or defaulting on a loan. This article will help you understand what it means to be a responsible borrower.
When you agree to borrow money from a lender, you enter into a legal contract and it’s your responsibility to ensure that you fully understand all the terms before you sign it. If there is something you don’t understand, you have the right to ask the lender.
Thereafter, your signature confirms that you agree to meet your obligations by repaying the loan according to the contract, so it’s important to know what your responsibilities are.
Upholding these responsibilities helps you maintain a good credit score.
Understand the terms of the agreement. Read the fine print regarding repayment of the loan amount or credit card debt as well as interest, fees and other charges such as insurance. Ask if you don’t understand something.
Check your statements regularly. Ensure the information on your statement is correct. If not, notify your creditor immediately. Keep your receipts and reconcile to your monthly statements.
Pay on time. Creditors have loaned you money so that you can buy now and pay later. It’s important that you make payments from the first instalment in terms of your specific credit agreement with each of your credit providers.
Debit orders. A debit order is an effective way to make payments because this is easier to trace and ensures that the payment is made on the agreed date. It will also help you to manage your debt payments because you are less likely to skip a payment when paying by debit order than when you are making cash payments.
Remember, every time you skip a payment this information is sent the credit bureaus and flagged on the credit provider’s system. Skipped payments will have a negative impact on your credit profile.
Update your contact information. If you move or temporarily change your address, change your contact number, or change jobs, notify your lender(s) so your information with them is up to date.
Repay the full debt. When you take out a loan, you are borrowing a set amount and are agreeing to pay interest on the outstanding balance. In the long run, you have to pay the full amount borrowed plus interest to satisfy the debt. This also includes any associated fees.
On credit card accounts you need to repay at least the minimum amount specified on the statement each month, on or before the due date.
Notify creditors if cards are lost or stolen. Always notify your credit card or retail store card issuer if your cards are lost or stolen, so that they can be cancelled.
To check your accounts and balances, you can go to www.mycreditcheck.co.za for your full free credit report.