City Press reader Sipho wants to apply for credit to renovate his house. Before he applies for the loan, he needs to budget how much he can afford to repay each month. The credit experts at Capitec suggest that he sets a good few hours aside to look at his current expenses and income.
To work out your budget, you need:
- Your bank statements going back three months
Check how much your consistent monthly income is after deducting things like once-off bonuses, overtime and tax, pension contributions and unemployment insurance (this is your net salary).
Make a list of your monthly expenses like your car instalment, home loan and store accounts. Add expenses such as food, fuel and electricity. Your bank statements will help you see which deductions and payments are made regularly. Also take into account the money you pay for things like contributing to the care of family members or even the community. Keep in mind that expenses can differ every month, so try to put an amount aside for unexpected expenses. The amount of money left after all your financial obligations are deducted is how much you can spend on repaying the loan. Now you know how much credit you can afford.
Qualifying for credit does not automatically mean the credit provider has to give you credit. All credit providers have credit assessment mechanisms and credit is granted at the credit providers’ discretion and if refused they can provide you with the reason after receiving a written request from you.
Five steps to ensure you get the best credit offer
1.Look at your budget and affordability to see if you can afford credit repayments.
2.Shop around – not all credit providers charge the same interest rates. Compare credit options and decide what will work for you. Never take more credit than you need. Remember, you must always be completely honest with the credit provider about your finances when applying for credit.
3.Look at any hidden costs and double-check the fees and charges. Make sure you understand the small print.
4.Make sure that the credit provider is reputable and registered. This is important because it means that they comply with the law and will respect and protect your rights as a consumer.
5.Once you’ve chosen a product and a credit provider, go back to your budget and see if you can afford the monthly instalment shown on the quote, and still have enough money saved for emergencies. If the answer is yes, you can proceed.
This project is reported by City Press and paid for by Capitec
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SMS your credit questions to 35697 with the keyword CAPITEC. Remember to include your name. Each SMS costs R1.50