Look after your bond first this festive season

Consumers need to ensure their bond repayment is their first priority this festive season, before any other spending, says Dr Simphiwe Madikizela, head of special projects at FNB Housing Finance.

“Every year we find a portion of consumers miss the end of year, or January bond repayments because of overspending during the festive season. It is essential to look after your bond as a first priority, which will put you on the front foot in 2016.”

The festive season is a time when South Africans tend to go all out when spending, without taking into account the financial and credit risk this presents if they forgo important expenses, such as their bond repayment, to fund holiday travel, entertainment and gifts.

“Missing even one bond repayment is very risky from a financial and credit perspective,” says Madikizela. “It’s not worth risking a good credit score to fund luxuries and festive season spend.”

To make sure you are on top of your most important expenses and honour your bond repayments you need to account for this expense first.

“The main issue with missing even one repayment, is that it is usually a sizable amount in proportion to your salary, and a big monthly commitment, which means that falling behind makes it very difficult to catch up again,” says Madikizela.

Missing your repayment will not only increase your balance and interest due, but may also attract legal fees, which will all add up and cost you more in the long run.

To avoid getting into this hole, put a plan in place on how you will account for your biggest expenses.

“Make sure that you have a clear understanding of all your expenses this festive season. Start with your most important and write these down, including your bond, car and other repayments that you are responsible for,” says Madikizela. “Also take into account the fact that there may be big expenses, such as school fees just over the horizon.”

Once this is done, make provisions that the first payment from your salary is towards your most important responsibilities.

One way to ensure that you aren’t tempted to miss a repayment is to set up a debit order with your bank, so that the payment comes off your bank account at the same time that your salary is deposited into your account.

“Many people are paid early in December, so let your bank know so that the debit order can be moved to the early date for this month. This way you won’t be tempted to miss a repayment, because your bond will be accounted for as soon as your salary is in your account,” says Madikizela.

Using your year-end bonus and putting it into your bond will also help you keep your home loan from going into arrears.

In future, make provision so that you have a buffer when it comes to your bond, which can be done by paying extra funds into the account. This means putting a bit extra into your bond every month which will build up reserves that not only helps you pay the bond down more quickly and save on interest, but will also give you breathing space if you are faced with unexpected expenses during the festive season, or any other time during the year.

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