The Ten Commandments of Responsible Borrowing
Representatives of the Banking and Non-Banking Registries introduced the "Ten Commandments" which advise people on the things to consider before taking on new credit. It does not aim to replace the very valuable services and advice of various centers for consumer protection which many people have come to consult in difficult financial situations. First and foremost, it wants to encourage the public to consider the risks related to borrowing and to assume a more responsible attitude to it, as prevention is always more effective than the subsequent cure.
1. DON'T BORROW MONEY FOR THINGS YOU DON'T NEED
Think twice before buying goods or services on credit and make sure you actually need these things before you apply for credit. Don’t buy a new plasma TV just because the neighbors have got one. You can buy what you want with your own money but if the money is borrowed, it should be something you actually need.
2. DON'T PAY LONGER THAN THE PRODUCT'S LIFETIME
Don't buy products or services on credit if the installments will exceed the product's lifetime. You don't want to pay 12 monthly installments for a vacation that only lasts two weeks.
3. DON'T RISK BANKRUPTCY
Always make sure that you know how much you can afford to repay on a monthly basis with respect to your economic situation. Always keep an escape route open and have a financial reserve ready for a rainy day.
4. DON'T TRUST EVERYBODY
Make sure you investigate the organization that you are applying for credit with in detail. You should always bear in mind that credit may be provided by almost anybody. The companies that don’t use credit registers to verify their applicants’ credentials compensate for the risk with higher interest rates or other penalties.
5. DON'T BE TOO HASTY TO ACT
Don't automatically accept the first credit offer you get. Carefully consider which type of credit is best for your purposes. Don't be overzealous, and make sure you compare several different offers.
6. DON'T JUST COMPARE INTEREST RATES
Always make sure to find out how much credit will actually cost you including management fees, early closure fees and other costs. Don't just compare interest rates, but APR and the total of money you pay as well.
7. DON'T SIGN WHAT YOU DON'T KNOW
Always acquaint yourself with the agreement and credit conditions in detail, including potential penalties and fines. Don't sign what you don't understand. If you need to, consult the experts.
8. THINK ABOUT THE FUTURE
Pay your debts regularly and on time to create a positive credit history for the future. If you need to, get insurance which covers your inability to repay the debt in future.
9. DON'T BORROW MONEY TO REPAY DEBTS
If, despite all the preventive measures you have taken, you get into a situation in which you are unable to repay your debts, don't borrow more money to pay them off. Try to find another solution with your creditor.
10. DON'T BELIEVE IN MIRACLES
If an established financial institution rejects your application for credit, think again about your economic situation before you apply for a costlier loan elsewhere. You should remember that this institution is not only protecting itself, but you as well.