Which Type Of Credit Carries The Most Risk?

How safe is your lender?

We all want to get what we want as quickly as possible and so, we can easily fall into the trap of using credit cards and loans too much. This is something you really have to watch out for because it’s so easy to end up having a lot of debt or paying off high-interest instalments and then, there’s the stress that comes with that.

Consider your credit

Having to pay off your loan means you won’t be able to splurge what little money you may have on yourself. And, for some expenses like buying a house, having no option but to do it with a mortgage can make it harder as well as put more pressure on your shoulders. You’ll need to start thinking about responsibilities like making regular payments and renewals without really splurging money for yourself now and again.

The riskiest type of credit.

Not all lending is created equal. The riskiest credit to secure is a loan from a money lender or ‘loan shark’. They are not registered with any regulatory authority, so you are not protected from shady practices.

They also usually charge high interest rates, so that you might end up paying back double or even four times what your original loan was. And if you fail to pay up on time, you might find yourself facing more than a nasty letter.

If you want to take a loan, there are reputable lenders such as banks and retailers who offer better rates and less risky conditions than the loans offered by rip-off operators like loan sharks.

What’s a good credit score in South Africa?

In recent years, South African regulations have become more strict. As a consequence, creditors are disinclined to lend funds to those whose credit history contains poor credit scores.

In the past, a score of 680 was considered to be very good, but now it is viewed as being average. Generally speaking, a score of 720 or above is seen as being favourable by most creditors.

With all of the different kinds of credit, it’s hard to figure out which one is the riskiest. The answer is that they are all risky if you don’t understand how to use each one of them properly. For example, using a credit card to buy a new television instead of putting it on a payment plan with your bank can have serious consequences if you don’t have enough money to pay off the balance.

Managing your credit correctly is important. Credit Health can help.