Be weary of reckless lending when applying for credit

The habit of reckless lending from major credit providers is still prevalent. We’ve seen this in the recent headlines with a well-known commercial bank going to court due to its multi loan practices and with other major financial institutions in the recent years. The consumer is unfortunately always at risk in these situations.

If you want to be empowered, you need to know your rights when it comes to applying for credit. It’s wise to check your credit rating from a major credit bureau such as Experian who provide a free credit report and credit scores or TransUnion.

If you have a complaint about a recent credit problem, you may want to approach the Credit Information Ombud a voluntary independent association who seek to resolve complaints from consumers and businesses that are negatively affected by credit information.

As South Africans, we find ourselves in a challenging economic landscape which indicates that we need to curb our spending habits, especially due to rising interest rates which increase debt servicing costs and higher inflation which reduces household cash flow.

Last year’s amendment to the National Credit Act (NCA), where credit providers were forced to adjust their affordability assessments linked to an applicant’s monthly income, helped tighten the regulation surrounding credit lending practices. Even though this has made a positive difference and has empowered consumers to an extent, the practice of reckless lending is unfortunately still evident.

The latest figures from the TransUnion SA Consumer Credit Index (CCI) reveal a sharp decline to 46.1 in the first quarter of 2016 from 54.1 from the same quarter the previous year. This is an indication that consumers are finding it harder to pay off their debts. The report took 56.9 million active consumer credit accounts into consideration, with findings showing one million of these accounts being in arrears.

If you’ve fallen into the debt trap, there are ways to recover from this and be more careful of approaching credit providers who are inaccurately assessing your ability to afford credit.

Take a few of these steps right now and start your journey to better financial health.

• Don’t increase your debt 

Stop borrowing money or making purchases on credit.

• Set out a new budget

To accelerate paying off your debt, cut down on expenses and create a new budget that will be devoid of any luxuries like eating out, buying new clothes, gadgets and spending money on entertainment.

• Sell everything you don’t need

A great way to free up some cash quickly is to take stock of your belongings and sell the things you don’t really need. Use that money to further pay off your debt.

• Partner with a debt consolidation company like Zero Debt 

We are here to help protect your assets, deal with your credit providers and take the financial pressure off you. Our debt consultants frequently deal with all the major credit providers and have a fantastic success rate when it comes to reducing our clients’ monthly debt repayments.

Speak to one of our NCR registered debt consultants today on 087 702 1738.

If you’re concerned about reckless lending and the impact it can have on your financial health, it’s time to take control and protect yourself. At Zero Debt, we’re committed to helping you navigate the complexities of credit and debt management. Whether you’ve fallen into the debt trap or simply want to ensure you’re making informed decisions, our NCR-registered debt consultants are here to support you every step of the way. We specialise in reducing monthly debt repayments and protecting your assets from aggressive credit providers. Don’t wait until it’s too late—take proactive steps towards better financial health today. Speak to one of our experienced consultants to explore your options and regain control of your finances. Contact us now to start your journey to financial freedom.

FAQs and Answers

1. What is reckless lending?
   Reckless lending occurs when credit providers approve loans without properly assessing a borrower’s ability to repay, leading to financial hardship.

2. How can I check my credit rating before applying for credit?
   You can check your credit rating for free through major credit bureaus such as Experian or TransUnion, which provide credit reports and scores.

3. What should I do if I have a complaint about reckless lending?
   You can approach the Credit Information Ombud, an independent body that helps resolve disputes related to inaccurate credit information.

4. How does reckless lending affect consumers?
   Reckless lending can lead to excessive debt, higher interest rates, reduced household cash flow, and financial strain due to rising inflation.

5. How can I reduce my debt burden effectively?
   Stop borrowing money, cut unnecessary expenses, create a strict budget, and consider selling unused belongings to free up cash for repayments.

6. How does the National Credit Act help protect consumers?
   The NCA requires credit providers to perform affordability assessments before approving credit, reducing the risk of reckless lending.

7. What is debt consolidation, and how can it help me?
   Debt consolidation combines multiple debts into one affordable monthly payment, often with lower interest rates, making repayments more manageable.

8. How can Zero Debt assist with my financial situation?
   Zero Debt helps protect your assets, negotiates with credit providers, and reduces monthly debt repayments through structured debt solutions.