good prime rates
10 April 2007

It’s all very well to say "get out of debt", but how do you go about doing this? According to Stephen Logan, a director of Credit Health, there are a couple of ways to get your credit record back on track.

Pay off old debts — the kind that you made an arrangement with a store/bank/etc or their attorney to pay off monthly. You are probably paying three times what you should because not only are you paying the debt, but you are also paying interest, plus the collection attorney’s sometimes very inflated fees.  A lot of people in this position cannot understand why these loans never seem to go down and this is why! The end result: you’re paying an average of 70 percent to 80 percent interest on these loans!

Reduce total debt, starting with the most expensive debt. This is roughly the way it goes: you are paying the most — 110 percent and upwards — on loans from micro lenders.  If you borrow R1000 from people like this, then in a year’s time you will have repaid R2100.  Next come the flyers you get at robots and the letters you get in the post that come from companies who look and sound like banks but are not one of the well known ones.

Do you have a credit card? If so you are probably paying 24 percent or more. If you use it for groceries then a lettuce that cost R5.99, paid off over years may cost you R209.71 in the end.

If you negotiated a good car repayment rate then well done, this could be your second least expensive loan at prime plus one percent (at the time of writing: 13.5 percent).

Of course, if you did without the new car and kept your paid up car instead, then you did even better!

If you negotiated like mad for the best possible home loan, you could be paying up to prime less two percent (10.5 percent at present). If you’re paying more than that  well now you know what’s possible and why on earth didn’t your bank tell you that you could get a better rate?

So here’s a tip:
If you have any doubts about what interest you’re paying, you can’t go wrong if you read the small print. Remember, the small print is small and hard to read for a reason, they use lawyer-speak to bore and scare you into skipping that section. But a loan is a contract and if you don’t read what it says, then you’re agreeing to their terms without even knowing what they are.

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