Eswatini: Understanding and Managing Your Credit Through Financial Hardship

With Eswatini coming out of a partial lockdown, millions of consumers and businesses are facing some tough financial choices – but it’s vital that people stay in control of their credit through this stressful time.

Patricia Zwane, country manager at TransUnion, says it’s important that consumers manage their credit even more carefully than usual through the COVID-19 pandemic, and beyond. But to manage credit they have to understand what credit is and how it works.

Borrowing money to reach your financial dreams – like buying a car, a home, or starting a business – is often called ‘good debt’. But debt is only a good thing if you’re borrowing money for a good reason.

Here are two guidelines to follow when you are thinking about taking a loan:

1. Make sure you are borrowing money from a bank or a call a registered lender, not a small street lender as they are usually unregulated.
2. Only borrow money if you can afford to pay back what you’ve borrowed.

Watch the extra interest

When you take out a loan, the funds are given to you based on your promise to pay the lender back in instalments over time.

• You don’t only pay back the amount you’ve borrowed.
• You also pay back the interest that the bank or lender will charge you.
• When you borrow money – you pay back extra for this service. This is interest.
• This interest can add up to a lot of money over time
• To avoid this, make sure the interest rate that the lender is charging you is as low as possible. Ask them about it and question it.

What is a credit history?

• One of the ways you can keep the interest rate low is by making sure your credit history is healthy.
• Your credit history is a record of the money you have borrowed in the past and whether you have a good record of paying back this money.
• The money you’ve borrowed could be loans you’ve been given over many years.
• A healthy credit history may help you qualify for lower interest rates and fees
• This frees up money for emergencies, for your retirement, and also those rainy day unexpected expenses

When all your credit history information has been arranged into one document, in addition to your demographic information (surname, forenames, ID, DOB, gender, marital status, addresses, employment and contact details), this document is called a credit report.

Think about the future

• Eventually, in the future when you apply for a loan, registered lenders will be in a positionto accessa copy of your credit report from TransUnion.
• Lenders will use the credit report to decide if you are credit worthy by checking your credit history, which is captured in your credit report. It is like a snapshot of how you’ve managed your money in the past.

For now

You can start improving your credit history straight away. Pay off your debts, honour your instalments on your credit and borrow responsibly. Over time your credit history will start to improve. It is all in the name of reaching your financial dreams realistically.

Talk to your lenders

If money is tight and you’re worried you’re going to miss a payment or two, it’s best to contact your lender before the payment is due. You can explain your situation and ask whether they can offer any assistance.

Consider contacting your bank or credit card issuer if you’re affected by the COVID-19 pandemic. You may qualify for some leeway.

“We know many people are feeling anxious about their finances during this challenging time. Organising your credit information and maintaining communication with your lenders are two ways you can help stay in control of your credit health during times of uncertainty,” says Zwane.