A short-term loan is a useful tool for a genuine one-off expense. It becomes expensive when it is used to cover everyday costs month after month. Ask yourself these questions before you apply.
Before you borrow
- Is it urgent? If the expense can wait until payday, waiting is cheaper.
- Is there a cheaper option? Talk to the company you owe about a payment plan, or ask your employer about a salary advance.
- Can you afford the repayment? Work out your income minus essential spending. The repayment should fit comfortably in what is left.
- Are you borrowing the minimum? Borrow only what you need, not the maximum you are offered.
Your rights under the National Credit Act
- Lenders must assess whether you can afford the loan before approving it.
- You must receive a quotation showing all costs before you sign.
- Interest and fees are capped by law.
- You can settle your loan early.
- You can request one free credit report a year from each credit bureau.
If you are struggling
Contact your lender as soon as you think you might miss a payment. Many will agree a new arrangement if you get in touch early. If you have several debts you can’t keep up with, a registered debt counsellor can help you restructure them through debt review.
Free help: National Credit Regulator, 0860 627 627, ncr.org.za. The NCR can also help you find a registered debt counsellor.