A pay-day loan is a small unsecured loan, which attracts the highest interest rate allowed by the NCA – five percent a month.
And because of the year-end hype and excitement, the festive season provides the perfect opportunity to spend money that you do not have.
“As anticipated, banks have adjusted their credit underwriting to account for the effect of the credit amnesty” said Advocate Kate Thambiran, Managing Director of LUCID Clear Credit, a credit rehabilitation firm.
“People are under the impression that banks will no longer have any adverse credit information against their names – this is simply untrue,” says Kate Thambiran, MD of LUCID Clear Credit.
Some people take cash advances on their credit cards to pay their other creditors on time. It is better to fall a little behind than to borrow your way deeper into debt.
Credit used wisely can be used to build wealth, for example, buying a home and paying it off will eventually give you an asset that will keep on growing in value.
Reaching a settlement won’t improve you credit score per se, but it will help you get more affordable monthly instalment and mean that you pay off the outstanding balance quicker – which in the medium term will improve your credit score.
What credit card users must realize is that credit cards are a tool which, if used wisely, can help establish and maintain good credit, and finance major expenses, but if used foolishly can also be the key to one’s financial undoing.
The best lessons come from simply talking with your child about why you make the credit choices you make and explaining the concept of borrowing money.
Borrowers who defaulted on their home loan during the recent recession turned out to be better credit risk than those who defaulted on several other types of loans.