Your guide to understanding credit agreement documents

Your application for credit has been approved. What now? You will receive all the documents that outline your credit agreement, but don’t  be worried if you don’t understand everything, it’s not that difficult.

Take your time and follow these steps:

Step 1:

Carefully read the documents that outline your agreement.

Pre-agreement statement and quotation

Before signing a credit agreement, you should understand what you’re agreeing to. If you don’t, you could land in financial trouble. Ask the credit provider to explain the quotation to you if you don’t understand it.

What is this?

These documents give you information about the financial implications of the agreement. A pre-agreement statement may have the terms and conditions of your credit agreement attached, or the terms and conditions may be separate. The quotation also shows the full cost.

Step 2:

Check important information

To understand the agreement and to ensure that the credit provider also abides by the National Credit Act, you should ask yourself the following questions when you read through the document:

• Does it state the total cost of the credit?
• Is the monthly repayment amount shown?
• Is there a delay relating to when you’ll start paying the first instalment? For example, do you only start paying after three months? (Understand what the difference would be to the total cost of the credit if you rather started repaying the loan immediately.)
• What is the repayment term?
• Are any insurance products offered?
• Are all the costs in line with the National Credit Act?
• Is the credit provider registered with the National Credit Regulator?

Check if the following information is in the credit agreement:

Some of your rights:

• Consumer’s right to terminate or rescind: Specifies the conditions of a termination, including the surrender of goods.
• Early settlement: States your rights and obligations should you choose to pay your loan off early.
• You have the right to apply for debt counselling.

General:

• Payments: When and how payments will be made, the number of payments, and the date of the first and last payments will be outlined.
• Statements: How often and in which way statements will be delivered.
• Insurance (if applicable): All insurance information, including what will and won’t be covered.
• Default administration costs: When and how this will be deducted.
• Addresses for receiving documents: Includes personal details of all parties.
• Penalty interest: Information about the interest charged on late payments.
• Marketing option: The option to be excluded from telemarketing campaigns, marketing or consumer lists, or mass distribution of marketing.
• Annual credit limit increases: Discusses automatic increases of credit limits for credit facilities.
• Credit bureaus: Information on the reporting of your information.

Credit provider’s rights:

• The deal can be terminated under certain conditions.
• The provider has the right to recover goods and to enforce the agreement.

This project is reported by City Press and paid for by Capitec