Bank Better, Live Better
The Credit Boot Camp part 9: 3 times you could say yes to more debt
We don’t like talking about our financial responsibilities, especially when it comes to debt. But, what if we told you there are certain instances when you should say yes to more debt? Intrigued? Read on.
It’s possible to go your entire life without getting into debt. Possible, but not necessarily smart if you’re building up a credit record. There’s good debt and bad debt, and you need to understand the difference.
Good debt is an investment that will grow in value, and could help you to generate long-term income. “When you borrow money, it shouldn’t be for day-to-day needs, but rather for something that will be an asset to you and help move you forward financially,” says financial journalist Maya Fisher-French. “That’s the good kind of debt.”
Bad debt does the opposite: it quickly loses its value, doesn’t generate long-term income. As Financial Fitness Bunny, Nicolette Mashile, says, “When you take on debt, it has to be for something that you can account for, whether it’s upskilling, buying equipment to get your side hustle off the ground or purchasing a car. Maxing out your credit card on shopping sprees and entertainment is bad! Don’t get into that kind of debt.”
Use credit to further your studies
Credit to further your studies is a textbook example of good debt, as it makes you more employable in the long run. If you’re already working and looking to upskill yourself, then taking out credit to finance a part-time degree or course will increase your skill set. And, it might even put you in the running for promotion at work.
Use credit to start a side hustle
You’re thinking about starting a business on the side to supplement your income. You might need to buy equipment and take a bookkeeping course to improve your business skills. A personal loan can help give you the financial boost you need to get your enterprise up and running.
Use credit to buy a car
A car loan is an example of good credit, it helps you to live better through giving you the freedom to travel when and where you need to. Capitec has partnered with WeBuyCars to offer unsecured loans that will give you the money you need to buy a car. This is similar to a personal loan, which means the interest rate will depend on your profile.
You’ll be able to finance any car of any age up to R250 000. You can take out a loan either for the full purchase price or to top up your cash deposit. When you pay upfront for your car with an unsecured loan it belongs to you the minute you drive it out of the dealership, instead of your bank until you’ve paid the loan in full.
“If you’re applying for secured vehicle finance make sure the vehicle is financed correctly and not with a balloon payment,” says Fisher-French. A balloon payment lets you repay part of the loan over its term (reducing your monthly repayments) and pay the balance as a lump sum at the end.
“Balloon payments usually allow people to buy a car they actually can’t afford,” says Fisher-French. And the real cost is seldom understood. “While it works for some people, it’s often a nasty shock for others.”
Fast facts: Capitec’s personal loans
A personal loan is a term agreement with a set repayment each month and an end date by when it must be paid off.
- You can apply for a personal loan of up to R250 000, which is payable over a period of up to 84 months
- Interest rates depend on your credit history and start from 12.9%
- You can choose between the amount you want, the monthly instalment that suits your pocket, or the option that gives you the lowest interest rate
- A personal loan is approved in minutes and the money is available immediately.
- You have the option of adding affordable credit insurance, including retrenchment and death cover, to your personal loan
How to apply for a Capitec personal loan
Applying for a Capitec personal loan is simple and you can do it online, via the banking app or by visiting your nearest branch. All you need is:
- Your ID document (you must be 18 years or older). If you’re married and your surname is no longer the same as on your ID, you’ll need to bring your marriage certificate along
- Your most recent salary slip
- A stamped bank statement that shows your latest 3 salary deposits
You can also save time and get an online estimate to see what you could qualify for before going to a branch.
A great reason to use a personal loan
You can use a personal loan to consolidate all your existing debt with one monthly repayment, which can often lead to a more affordable interest rate or shorter term.
“I actually spoke to a Capitec client who told me that by consolidating her debt, which offered a lower interest rate and more affordable bank fees, she saved more than R2 000 per month,” says Mashile.
When considering debt consolidation, be sure that the initiation fees, service fees and insurance of the new loan are less than you are currently spending on the different loans. The consolidated loan term should also not be so much extended that the interest works out more over time than what you would’ve paid on your old debts. If the consolidated loan offers lower costs, less interest and a shorter repayment period, it should save you a lot of money.
The benefits of consolidating your debt
Get a Capitec personal loan
Invest in your future by a personal loan to do that online course, set up your home office, or finally buy a car. Apply in a branch.
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