What should I consider when getting a loan or credit card?
Loans are facilities provided by financial institutions to help you in carrying out certain transactions or purchases. For example, when you buy a car or a house, you may need to borrow from a banking institution to finance your purchase.
Credit cards are payment instrument that allow you to pay for goods and services instead of using cash.
Below are some of the issues you need to consider when taking a loan or credit card:
- Different loans have different features, interest rates, fees and charges, and terms and conditions. Know what you have agreed with your banking institution.
- Make sure you can afford the monthly payments. As a general rule, your monthly payment on your debts should not be more than one third (1/3) of your gross monthly household income.
- Pay on time to minimise interest charges.Try to use any lump sum money received, such as bonus, to reduce your loan.
- Exercise more control when using credit cards since you are effectively having cash in hand. If you overspend, you may end up with a huge credit card debt. Remember, finance charges for
credit card debt is high, it can be as high as 18% per annum.
- Talk to your banking institution as soon as you can if you have a debt problem. Your banking institution may be able to vary your repayment amount for a short period until your financial
position becomes better.
Reprinted with permission from BankingInfo (A Consumer Education Programme)
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