An asset that you buy on credit, such as a house or a car, represents the hard work you put in to become good for credit. Remember that the value of your asset has a direct impact on the amount of your loan or credit. For example, if you want to sell your car to help settle the amount outstanding, it will need to have some value or worth.
You are liable for the total debt, and whether or not the amount you recover from the sale of the car is enough to cover such debt is your responsibility.
Take these steps to make sure your asset is protected:
1. Insure assets bought on credit
Many items, such as furniture and electronic appliances, can be covered by your household insurance. It is your responsibility to check that the specific asset you bought on credit is covered. Read your household insurance policy carefully to ensure that it will cover the asset for all eventualities, including theft, a natural disaster or damage.
2. Take good care of it
The better you look after the asset you bought, the better it will retain its value.
Your car: Many people sell their car while they’re still paying off the loan. You will still be liable to pay off the full amount after selling the vehicle, so make sure it’s in good condition to get the best price possible. Have the car serviced regularly, keep the exterior looking good and the inside clean and it will help you get a fair price for it.
Your house: Buying a property is most likely the biggest investment you’ll ever make. Make regular repairs, and fix problems as they arise. This will help your property keep its value and even increase what it’s worth. Keep in mind that things such as plumbing and electrical fixtures will need to be upgraded from time to time.
3. Understand your credit life insurance policy
Credit providers will require you to have credit insurance. You can use your own credit insurance if you already have, or take up insurance from the credit provider offering you the loan. Read your policy carefully and make sure you understand exactly what is covered.