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FNB South Africa

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8mo Edited

How do you choose the right type of credit? FNB Executive Head - Middle Market Segment, Amika Maharaj sheds light on how various types of credit can help you align to your financial goals #MoneyMondays #Credit #FNB #LoveFNB

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One of the questions we get asked is how do I choose the right type of credit. So I've brought in an expert today to talk to us specifically about that. Amika, thank you for joining us today. And the first question, let's go straight out of the bet, different types of credit. Talk to us about that. The first thing we need to consider is the need and dependent on your need. There's essentially two types of credit. There's secured credit, which matches to a need. Should buy a home as an example or purchase a car and then there's unsecured credits and there's a few different types of unsecured credits as well. So let's talk about unsecured credit. We've got two types there. We got the transactional, we've got the one sort of won't you explain those two types, you know going back to the need of the credit, it's important to understand is this need a once off need. So as an example, is it an unexpected medical bill as an example that you need to pay. So that's a once off need, you know it's a specific amount. That you'd want to repay over a specific amount of time and then once that's paid off, you know that's done. Then the other type is what we call a facility or you know, a recurring need. So as an example, there might be an unexpected medical bill. You know, you might want to start a little business. You know, there's school fees coming up. So there's a few needs that need to be catered for using credit and that's where you're recurring or your facility type credit comes in. So if you're looking at buying things like your groceries, your fuel. Your beauty spend, all the sort of transactional type things that would be something like a credit card, right, 100%. And I think for me the beauty of the credit card is if you use it cleverly, there's an up to 55 days interest free period as well. So you swipe your credit card. If you settle the amount in full, you actually pay zero in interest, which is a really powerful cash flow management tool. And remember, the limits on your credit card is not a target. So 0 the outstanding balance every month. And then of course if I have a loan, what are my options then I have a loan, I've got a personal loan. Suddenly have an emergency I don't have sufficient savings for because obviously if you have an emergency you first want to pay for it out of savings. But I have a personal look. What then you know when this need arises? It's important to evaluate what credit do I have because you really want to avoid taking up multiple types of credits and then it's going to be difficult to manage. So my suggestion is that you know you see if you can top up that personal loan as an example, or if you have a credit card, get a limit increase on your credit card and that just helps you manage your debt. Water, and it also helps you save on fees from taking up additional products. So there's a couple of points that you mentioned there. The first thing is obviously that credit trend that could be that could affect your credit record and applying for lots of credit could also affect your credit, which could also impact how much you are paying for interest, right. So let's talk about interest and let's talk about fees. But more specifically the fees, what are the fees that you need to consider about when it comes to credit? So there's a few types of fees and I think it's really important to review the quotation in terms and conditions. Before you accept those T's and C's. So there's typically an initiation fee that's payable which is a once off fee. Then you have monthly service fees as well and that's across you know, secured unsecured interest is the big one. And it's important to understand you know am I getting the best rate, Is it personalized interest based on my risk profile as an example. And then with certain products like personal loans, there's also you know an insurance premium, so you know typically a credit life protection as an example. And this really protects you from, you know those unforeseen circumstances. So really important to understand what you're paying for and what's part of those decencies. So the take out is make sure that you first of all check your credit record that that's in a good position. The second thing is make sure that you pay on time and that you're using the right credit for the right need. And that of course is if and B money Mondays. Thank you for joining us.

Business Development Specialist

8mo

Thanks for sharing

Dikakwe Mosesane

Dikakwe Mosesane

Solutions Specialist

8mo

Love this

IT Operations Manager at FirstRand Bank Limited

8mo

Well done Amika, good to see you again!

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