*Ntombikayise Molose’s life took a turn for the worst when she was retrenched from her first job after graduation. What made it worse was the mounting debt she had gotten herself in within just three years.

“It all started when I got a temporary loan for petrol; it was my first ever experience with credit and it didn’t feel as bad as people always described it,” *Ntombikayise Molose tells us.

*Ntombikayise graduated from the University of Kwa-Zulu Natal and moved to Johannesburg for a great job opportunity. She was advised not to rush getting car, but to use public transport until she builds a good credit score and is able to afford a car and still live comfortably, but because of many pressures, she got a car in the first six months of her being employed.

Read more: How to get out and stay out of debt

“I worked in Rosebank and lived in Centurion, so I felt I needed to buy a car for the travelling, but when I look at it in hindsight, I could’ve easily taken the Gautrain,” she says.

“Times got tough, because don’t they always, and before I knew it, I couldn’t afford anything. With rent, electricity, water, my car instalment and insurance, medical aid, food and all these other expenses, my salary wasn’t able to get me to the next pay day – it was bad.”

Because she qualified for loans, *Ntombikayise took a temporary loan for R1000 to pour petrol in her car. “Sooner or later, I got used to taking loans every single month, it became a habit. I’d even take loans to go on vacations with my ex-boyfriend – until I got retrenched.”

When she lost her job, *Ntombikayise’s car was repossessed as she could no longer pay for it, she also had to move back home as she couldn’t afford to pay rent. “Right now, I’m at home with no job and deep in debt. I owe the banks almost R400 000 and I don’t know where I’ll get that from. This is all excluding my student loan – I wish someone could’ve warned me about taking credit before I got in too deep,” she admits.

Credit is a useful benefit but over-reliance on it can lead one into over indebtedness.  Before taking on credit, there are a few considerations that should be made, that means before you approach a lender, it’s important to think carefully about the reasons you require credit.

Read more: This is how I saved to buy my own home in less than two years

Programme Manager for FNB Consumer Education, Dhashni Naidoo says Ntombikayise is not the first to fall into the debt trap,

“Most consumers make the mistake of thinking that simply because they qualify for credit, they should take it; the function of credit should primarily be to improve one’s life over time instead of funding a lifestyle expense. For example, borrowing to finance studies has a material benefit on your professional life whereas using credit to host a party will have no impact on your life except leaving you with a debt burden. Being able to differentiate between needs and wants is an essential part of deciding whether or not to access credit.”

“If you have thought carefully about your reasons for borrowing, you are less likely to take up credit that you don’t really need and that could save you a sizeable amount of money,” she adds.

Dhashni says these are the things you should consider before taking credit:

  1. Make sure you can manage the debt while having to honour other existing living expenses that are already part of your expenses.
  2. Relook your budget to ensure you can afford to pay the agreed amount for the number of months until the loan is settled.
  3. Ask the lender what will happen if you miss a repayment.
  4. Are there any additional charges that may apply such as administration fees for the loan, if so, ask what exactly you will be paying additionally.
  5. Enquire about the interest rate and how it’s applied, some interest rates are calculated daily, monthly or annually.

“Depending on the loan amount that you take, it’s important to be cognisant of the fact that any debt that you have will impact your finances. Commit to having a budget in place, this will help determine if you are in a position to take on credit in addition to the existing expenses, if not the best approach is to determine if saving would be a better option especially if you need the money for non-essentials such as a weekend away for example. Credit can only benefit you when used responsibly and that means borrowing for the right reasons and not to cover daily expenses,” Dhashni concludes.

*Names have been changed.