These are the questions you need to ask your credit provider
Before you even consider a credit offer – be it to pay off debts, to purchase that dream car, or to buy your first home – there are a few questions that you should ask yourself and your potential credit provider.
Finding answers to these questions, before you commit to anything, will ensure that you accept an offer that matches your needs and your budget.
Piet van der Walt, Head of Business at Sanlam Personal Loans, says you should start by asking yourself the following questions.
Does the Offer Sound Real?
Before you’ve even begun to consider how a credit offer could help you right now, make sure you’re not on the phone with a scam artist.
“There are many scamsters out there – so, make sure the credit offer is from a legitimate company,” says Van der Walt. “The credit provider should identify themselves with the correct legislative information and confirmation of their status,” he continues. The National Credit Regulator (NCR) is a good reference point for this, suggests the National Executive Committee of the Debt Counsellors Association of South Africa (DCASA).
Do I Really Need This?
Sure, you may be eligible for the credit offer, but do you really need credit – and can you afford it?
“Check your budget and make sure you can afford the credit offer in the first place,” recommends the DCASA. When you factor it into your budget, think long term, says Lubabalo Shepherd of National Debt Advisors, who adds: “Keep the term in mind, as this will influence any financial decisions you make for the duration of the loan repayment period.”
Van der Walt acknowledges the role of credit in modern society: “All of us need credit at some time in our lives – for planned and unplanned reasons.” Besides this, he notes the importance of building a good credit score: “We also need to show that we are financially responsible to receive and maintain a good credit score.”
Shepherd suggests that when you get a credit offer, you ask yourself: “In what way would more credit help me?” In terms of affordability, consider: “Can I afford the monthly repayment?”
Van der Walt highlights the importance of finding a responsible credit provider. He suggests asking whether the provider will ensure that you don’t over-indebt yourself, and offer you a loan that you can comfortably afford to repay.
Can I Choose My Repayment Term?
This is an important question to ask your credit provider – and it’s just one of the many questions they should be comfortable and prepared to answer. If you take up the credit offer, it needs to be on conditions that will be manageable for you. Van der Walt suggests you ask other questions too, such as:
- “Do you offer credit protection?” (For example, life, disability and retrenchment cover)
- “What will my interest rate be? Is it monthly compoundable?”
- “Will I pay a penalty if I pay off my loan earlier?”
- “What is the administration fee on my loan?”
Red flags should go up if a provider can’t answer these basic questions as part of the credit offer. “Most debts are already pre-structured, so the credit provider should be able to answer all questions relating to the term, interest rate, instalment and any service charges or credit life insurance,” says Shepherd.
Once you have these answers, shop around to compare the credit offer. “Don’t only enquire from one credit provider. Compare rates and terms, and costs like initiation fees,” suggests the DCASA.
Take the right precautions especially when you’re dealing with people who are essentially strangers over the phone – even if they do claim to represent a credible organisation. If you’ve been offered a personal loan, it’s worth considering these points before signing anything.