Inflation is on the rise in South Africa, according to Bloomberg, and it may cause interest rates to increase as well. Fuel and food prices have led all other everyday items to become more expensive. This might pose a challenge to many South Africans, since not only they will need more money to cover their monthly expenses, but also they might need more money to pay off their loans.
We know that when fuel prices are higher, everything else becomes more expensive. Your food, your children’s schools, clothes, entertainment, and what not. You might become aware of the fact that the money you needed to cover all expenses before is no longer enough today.
If this is your case, a good idea might be to study your finances so that you know how to proceed in the long run. Having a clear notion of how much money you actually need to cover your expenses will help you budget in a more conscious and responsible way. This way, you will be able to know for sure how much money you will need to set aside to pay for food, living arrangements, your children’s schools, medication, loan installments, etc.
If after carefully studying your finances, you realize you’re too tight, some adjustments will need to be made. It might be the case that you have a long term loan with a bank or other loan institution. These kinds of loans are subject to have increases because of the rise of interest rates. And if you were considering to take out a long term personal loan, for instance, you might want to reconsider if now is a good time for that. What you should ask yourself is: will I be able to pay for the loan installments in the long term? If after reviewing your budget, you realize you will have no problems paying off the loan, then go ahead. However, if you are not sure if you will have the money, you might as well wait until a more proper time.
Learning about how Loans Work
Being financially knowledgeable might spare you more than a headache. Understanding how loans work, what interest rates are, and what kind of financial institutions are there is a must if you want to maintain a sound finance condition.
Research the differences between a long term loan and a short term loan. Investigate the various types of loans in the market: personal loan, home loan, vehicle loan, student loan. Mastering these concepts will better prepare you to make an informed decision when thinking about taking out a loan in this particular and any other context.
Loan consolidation
If you already have different loans, you might consider consolidating the loan. However, although loan consolidation can be a great idea in certain scenarios, it might not be so in this particular context with interest rates on the rise, especially if the term of the loan is extended. What you could do, conversely, is paying more money on your monthly loan installments in order to shorten the amount you owe to the financial institution.
In times of financial crisis, it is always a good idea to cut down on unnecessary expenses. If after budgeting, you realize you are short of money, then try not to spend more than it is necessary. Do not engage in buying items you do not actually need, or eating out as much as you used to. Think of it as a precautionary measure until things get better.
Oil price jumped this last year internationally, and of course, it affected the economy of South Africa. With the increase of fuel prices, all other items suffered a price variation as well. All of this creates an inflation that directly impacts on interest rates.
