It is a sad reality that South Africans are generally ignorant about personal finance, and many live by the habit of spending now and paying later. Currently the ratio of debt to disposable income of households is around 76%, it tells you what percentage of consumers' monthly gross income goes toward paying off debts. About 47% of credit active consumers are two months in arrears or more. About 14% of these consumers have judgements or administration orders against them. A fifth of credit-active consumers are three months or more in arrears. This paints a picture of a nation overextending itself.
People who know the meaning of debt, a loan and saving money- and who understand the impact of these – are the people who can plan their lives and ensure a better future for themselves and their dependents.
How does it work? Instead of a consumer paying off a number of different loans every month, which might have different interest rates, the consumer can just apply for one big loan, pay off all the other debts they have, and then be left with making a single payment towards that loan every month. The repayments are usually lower instalments, giving them more disposal income, which at first glance seems very attractive.
Don't buy on credit, especially for funding living expenses and holidays.