By Anelisa Salavu
South Africa has moved from being a cash to a credit nation in the last seven years. Many factors which caused this include the downturn in the economy and also the rising unemployment rate especially among the youth.
According to a World Bank study, South Africans were the world’s biggest borrowers in 2014. The Global Findex report found that 86% of South Africans took out loans. This is more than double the world average which is 40%. Our youth are addicted to obtaining store cards and personal loans. This is mainly to purchase goods they cannot afford at that specific point in time.
According to statistics compiled by debt management firm, Debt Rescue, South African consumers owe the bulk of their monthly salaries (75%) to creditors. The number of young South Africans between 18 and 25 years old who have become over-indebted has grown significantly over the past year, according to a study by Unisa.
Maintaining a credit record is essential especially when you want to buy your first car or make a property investment. It is also important to know how to manage debt and keep a healthy credit score as debt becomes easier to get for first time salary earners.
Liberty Life financial planner, Rene Maritz says: “People don’t realise how important it is to build a good credit record. Every loan you apply for involves your credit record. This will mean a lot to reduce the rate and final total of your repayments on your biggest and most important investment and expense, your first home loan.”
Bureaux’s like Transunion or Experian allow you one free comprehensive disclosure of your record. You might think you are good and be surprised at how bad your credit score actually is. Every company you have to repay your debt to, reports to a credit bureaux. If you pay your credit card a single day late it can severely affect your credit score. “This can give you some indication of why you are struggling to get a low interest rate and which companies are damaging your credit,” says Maritz.
The implications of a bad credit record can be far-reaching. You will struggle to get credit and if you do it will be at a high interest rate, because the company will see you as a higher risk of not paying it back. In simple terms you pay more money for the same loan as someone with a good credit record.
Interest can be good or bad. Some will have to pay it, and some will make a profit earning it. Get to be the one earning it.