Zuko Komisa
- “Good” credit involves investing in assets like property or education that provide long-term value.
- “Bad” credit is typically high-interest debt used for consumables and lifestyle items that depreciate quickly.
- Understanding these distinctions is essential for South Africans navigating current economic pressures without falling into a debt spiral.
With the cost of living on the rise, more South Africans are leaning on credit just to keep their heads above water. But while borrowing can be a lifeline, it can also be a trap.
René Moonsamy, Chair of the NDCA, breaks down the crucial difference between “good” and “bad” credit to help you avoid a downward debt spiral.
Think of good credit as an investment in your future.
This usually involves borrowing for things that gain value over time or help you earn more in the long run like a mortgage for a home or a student loan for your studies.
On the flip side, bad credit often involves high-interest loans for things that lose value the moment you buy them, such as clothing accounts, expensive electronics, or using credit cards for everyday splurges you can’t actually afford.
Moonsamy shared that there is currently a rise in South African going through debt counselling.
“The rise in debt counselling speaks to the stress the average South African is going through because we can no longer afford to meet basic living expenses.
Between electricity transport, food, groceries, schooling, and everything that pops up in between. It’s difficult to imagine how a normal Suth African with no means of additional income and not having savings is going to weather the storm without credit” said Moonsamy
She shared how the key to staying afloat is knowing when a loan is working for you and when it’s just weighing you down. By understanding these basics, you can use credit as a tool for growth rather than a shortcut to financial stress.
Listen to the full conversation here:
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