Consolidation Loans: The Quotation

Debtfree asked Kim Armfield of Armfield & Associates & Libertine Consultants about what a consumers rights are when they go looking for a consolidation loan or in fact any type of credit.

Kim: We have come a long road with consumers in the credit industry and  the legal field, and yet we are still amazed at how little the ‘ordinary’  consumer knows about his or her rights. Let’s consider you rights as regards a loan that you, the consumer, may apply for. This includes those “consolidation” loans that are so tempting and seem, at first glance, to be the answer to your financial and debt problems. But are they really? And if by some slim chance such a consolidation is the answer, let us consider what you are in for. Otherwise put, when you make the decision to apply for credit, ensure that you make an informed decision.

 Are you aware of the fact that when you apply for a loan at any registered credit provider, they have to give you a quote? This is a requirement of Section 92 of the National Credit Act 34 of 2005 (the quote is referred to as a “pre-agreement statement and quotation) and this quote is valid for a period of 5 working days. So what must be on this quote and what is the purpose of the quote?

It is important that you read your quote carefully before signing it (the quote) and before signing the actual loan agreement itself. The following information MUST appear on the quote that you receive; but please keep

in mind that the quote is usually attached to your loan agreement and it is not given to you separately:

 a) the capital amount that is being loaned to you;

b) the interest rate that they wish to charge you;

c) all other credit costs, for instance credit life insurance;

d) the total amount repayable, which will include all the above sums

This information shows you exactly how much you will repay.

So, now that you know what you are in for – and you should note all the charges, fees and interest that you are giving away from your hard-earned money – the next question is:

What is the reason for the quote?

Well, the answer to this is quite simple, and that is so that you can shop around. Remember that you are regarded as, and are called, a “consumer” and of course it is the natural function of any consumer to shop around and obtain the best deal he or she can find. This is also true when you seek a loan or credit facility; you have 5 working days to shop around for a better deal. If you are in good standing with the credit bureaux, in other words you have no default listings or judgments and if you faithfully pay your creditors on time each month, then your chances of getting a better deal (and in particular better interest rates) at other credit providers is extremely good. Even if you don’t have a great record you should still shop around. Credit providers, including the banks, want your business and they are not ‘doing you a favour’ by granting you credit, after all their credit comes with a price! And so, why not shop around to ensure that the loan will cost you as little as possible…..that makes money sense, does it not?

[Df] Thanks Kim we look forward to the next installment in Jan 2014.