Have you noticed how financial institutions entice consumers with unsolicited loans at this time of the year?
Desperate consumers might be tempted to take the loan without thinking about its effect - which will affect their ability to save.
In the past two weeks I have received three offers. The institution I bank with offered me a loan of up to R100000.
Two other institutions I have never dealt with sent me SMSes offering loans to consolidate and pay all my debts.
The offers are lucrative, but surely, my bank should know better, I don't need a loan.
The offer made me feel like a valued client, as they put it.
I am sorry bank, I cannot accept your offer. I have resolved to save a little of what is left after paying all my debts.
I have taken heed of Tito Mboweni's advise when he said we need to develop a culture of saving.
Interestingly, my bank also made a similar offer to my brother, who is not even their client and earns far less than R5000 a month.
He had a legitimate expectation that he would get a loan of R3000 when he approached them last week, but came back with a bruised ego. The bank declined his application because he was not their client. The bank should have known this before issuing their letter guaranteeing him a loan of up to R100000.
On the other hand, two pensioners, Jappie Molefe and his wife Margaret, are repaying a "loan" of R20000 that was declined because of their age.
They too were offered an unsolicited loan, but never received a penny from the institution that made the offer.
l African Bank is investigating why the Molefes have to repay a loan that was never granted.
Peter Setou of the National Credit Regulator warns consumers to borrow responsibly and wisely, especially at this time of the year.
He said consumers must borrow only when they need to.
"And most importantly, they must plan in advance how they will repay the loan and whether they can afford it," he said.
Setou said failure to plan and budget for essentials such as school fees, stationery, uniform, rent and transport leaves consumers in an untenable position.
"Consumers often find themselves with no option but to apply for credit. This may result in taking out loans irresponsibly which can lead to over-indebtedness," he said.
"This entails borrowing money without planning how to repay it, borrowing money from unscrupulous credit providers, signing loan contracts they do not understand and eventually finding themselves in a worse financial predicament."
He said it was important that consumers be aware of their rights as borrowers in order to protect themselves from unscrupulous lenders.
l Remember that loans cost money. Only borrow what you need. Make sure that you can afford to repay the loan or credit you have taken out and still meet your living expenses to avoid being caught in a debt cycle.
l Compare interest rates and other costs from different credit providers. Always ask, and make sure you understand, what the total monthly repayments, including insurance and all other charges, are.
l Avoid paying over too many months; it will cost you more.
l Plan the repayments before you apply for a credit card or overdraft. Take into consideration the interest and other charges and how this will affect your ability to save.
l Ensure that you understand the terms of the agreements before you sign.
l Avoid signing any blank documents when applying for a loan.
l Avoid taking on more credit or borrowing from one credit provider to pay another as this may lead to a debt trap.
l Most importantly, talk to your credit provider if you have problems repaying your loan.