Guard your credit record for the future
In the current global recessionary climate it has become more important than ever to protect your credit record.
In the past, says Martin Schultheiss, CEO of Harcourts Africa, banks were willing to make concessions for consumers with less than perfect credit records. And, as consumers, we became used to defaulting on loans without severe repercussions.
But those days are gone. Apart from stringent legislation already regulating credit in SA, it is quite clear that compliance and assessment criteria are likely to become even stricter in the light of the worldwide credit crunch.
This crisis has its roots in lax assessment of individuals creditworthiness and it has led to severe pressure on banks and financial institutions. Therefore, we can expect that future credit extension will hinge on two things taken together, namely affordability and creditworthiness. A default in future is, quite plainly, going to lead to credit taps being tightly closed.
And this could have a severe impact on consumers who in future may need credit to finance homes or even less costly items such as vehicles, he says.
I believe that banks are either going to be more stringent off their own bat or that stricter compliance requirements will be legislated..
This makes it vital for consumers to protect their credit records. Of course, being in debt and not knowing how to get out of the trap is very stressful. There is no quick solution and consumers are advised to take action at the first sign of trouble.
Schultheiss says the best course of action for consumers facing mounting debt that they cannot repay is to approach lending institutions to make alternative arrangements.
Increasing numbers of homeowners are now finding it difficult to keep up with their bond repayments and face the danger that they may end up deeper in debt if they dont take quick action. Lenders on the whole are usually amenable to reschedule debt if approached before the debt burden becomes unmanageable.
In extreme cases consumers should consider selling the property, paying back the outstanding amount to the bank and renting an affordable alternative, rather than face repossession and a black mark on their credit records.
Article by: www.harcourts.co.za