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If you are fortunate enough to receive a 13th cheque or a bonus payment at the end of the year, should use at least part of it to reduce the capital portion of their home loan.

That’s the advice of Carl Coetzee, CEO of SA’s foremost home loan originator BetterBond, who says that with interest rates remaining well above the rate of inflation, the best "present" consumers can give themselves this holiday season is to reduce their debt load.

"And a relatively small amount of cash goes a long way when you apply it to your home loan balance. If you pay R10 000 off a R1m home loan this December, for example, you will reduce the 20-year repayment period by around seven months and, at an interest rate of 10%, save more than R61 000 worth of interest.

“Reducing your outstanding loan balance will also help create a cushion against any future interest rate increases, and give you more room to manoeuvre if you ever need to borrow against your home to pay a child’s university fees, for example, or to cover a medical emergency.”

Other smart ways to spend your bonus, he says, include reducing the balances on high-interest debts such as credit and store card accounts, personal loans and car finance, because the less income you have to use to pay debt instalments, the better you will be able to cope with any increases in the price of essentials like water, electricity, food and transport next year.

“Many schools also offer discounts to parents who pay a year’s fees in advance, and that can also be a great way to spend a 13th cheque.

“Alternatively, you could put at least part of your bonus into a savings account to provide for home maintenance and repairs. This will help you meet home ownership costs over the next 12 months without wrecking your household budget.”

Coetzee says that if your budget is free of high-interest debt and you’ve already set aside money for regular maintenance and emergency repairs, it could just be time to start making your home improvement dreams a reality. “Even if you don’t plan to sell now, for example, it is always worth increasing your home’s value by sprucing up the exterior appearance and garden, for example, or improving the security measures.

“And if you are planning a substantial alteration like an extra bedroom or bathroom to make life easier for your family, or the upgraded kitchen you keep promising yourself, now the time to get some estimates of what your project will cost, set a time goal and use your bonus to start saving for it so that you can pay cash and not create more debt.”

PERSONAL FINANCE