The holiday season has come to an end, ushering in the new year, and unfortunately, for many financially strapped individuals, the harsh reality of January expenses has served as a stark contrast to their festive celebrations. This month proves challenging, particularly for those who failed to budget wisely during the festive season. With December pay often arriving early, there is a prolonged gap until the next payday in January, resulting in depleted pockets and a pileup of unpaid bills, setting a challenging tone for the beginning of the year.
As a consequence, a significant number of people are resorting to excessive credit as the sole means to cover essential expenses such as rent/mortgage, food, school fees, and stationery. Poppy Kweyama, Manager of Education & Communications at the National Credit Regulator (NCR), emphasizes that besides the high cost of living, poor budgeting and reckless spending from the previous year contribute to the increased need for excessive borrowing during this period.
NCR’s statistics for the quarter ending September 2023 reveal a quarter-on-quarter rise in impaired accounts, prompting advice for consumers to borrow wisely and responsibly to avoid tarnishing their credit records. Kweyama suggests restricting credit to necessary expenses and planning repayment strategies in advance.
During this financially challenging time, some individuals may seek financial assistance desperately and may turn to loans, even from unscrupulous credit providers. The NCR urges consumers to exercise credit intelligence, advocating borrowing only from registered credit providers and borrowing the necessary amount precisely when needed. Kweyama underscores the importance of planning loan repayments and assessing affordability.
To aid consumers in making informed decisions, the NCR encourages understanding credit agreements and terms before signing. Kweyama advises against leaving IDs or bank cards with credit providers, emphasizing the illegality of such practices and reminding citizens of the necessity of possessing their IDs for the upcoming 2024 elections.
It is crucial to comprehend that credit comes at a cost. The National Credit Act (NCA) regulates the fees associated with credit transactions. Consumers can only be charged initiation fees, interest rates, service fees, and credit life insurance. Initiation fees, governed by the NCA, are set at a standard rate, ensuring fair charges for credit facilities, short-term credit, and unsecured credit transactions.
Before deciding to borrow, individuals are urged to familiarize themselves with associated fees and charges. The NCA outlines limits on initiation fees, interest rates, and monthly service fees, promoting transparency and protecting consumers from unfair practices. Additionally, credit life insurance, if required, should align with the outstanding obligation to the credit provider. Other costs, such as delivery fees, will vary based on the nature of the purchase. Credit- NCR
