If you don't manage your accounts properly, your bank will give you a poor credit rating
. Even if you do not have a bank account, if you do not pay your accounts regularly, your creditors will give you a poor credit rating. They will give that rating to any business that contacts them to find out whether you are a reliable customer or a poor risk.
But it gets worse. If you fail to pay more than one instalment, your creditor can take legal steps against you. Summons
will be issued against you, and then judgment
. Then your name will automatically be handed over to a credit bureau
and you will be blacklisted
. Once this happens, you will not be able to open any account anywhere or take out a bank loan (including a home loan).
It generally takes five years for your name to be removed from the list. Although you can negotiate to have this done earlier, it is a long and frustrating process, which requires great determination and patience.
In effect, a judgment against your name might affect your financial standing and your ability to get credit and to open accounts.
Some of your further rights and obligations as a debtor
When you borrow money on credit, you accept responsibility
for your actions
. Make sure that
:
- You deal only with a registered bank
or moneylender (all microlenders who operate outside the Usury Act have to be registered with the Micro Finance Regulatory Council (MFRC)
.
- You demand a written contract explaining the terms of the deal.
- You know whether a cooling-off period
applies, and how long it is.
- You have not signed any blank forms
for the dealer or moneylender to complete afterwards.
- You are allowed to pay the debt off sooner
than the contract states, if you want to. Check with the creditor to find out if there are special conditions governing early settlement.
- The dealer or moneylender does not keep your ATM card
or Identity Document
. It is against the law.
- You are able to keep to the terms
of the contract.
Definition:
A microloan is any loan under R10 000 from a bank or microlender that must be repaid within 36 months. Interest rates vary as the Usury Act only limits the amount of interest that can be charged on loans over R10 000. So shop around! Check what the rate is before you borrow money.
Beware of the microlending cycle!
Many people have met their downfall through the vicious cycle of borrowing from a friend to settle an urgent debt ... and then borrowing from a microlender to pay the friend ... and then borrowing from a second microlender to pay the first microlender!