Make a Plan

Make Considered Financial Decisions

Keep calm and carry on. This iconic phrase is certainly good advice when navigating the uncertainty that the COVID-19 pandemic has introduced into our lives. South Africans have found that this crisis has continued to wreak havoc on livelihoods and finances. Not knowing the extent to which the crisis will affect the economy, and how this will impact your personal circumstances, is stressful. However, it’s best to remain calm and make careful decisions.

The future is uncertain and due to communication overload via the Internet, there’s a massive amount of fake news and confusing information in the marketplace. Finding a constructive roadmap through this situation will require a calm, clear head. This is especially true when it comes to assessing your financial health. Methodically think through all of the implications that could affect you in the near and long-term future. Consider these important tips for making careful financial management decisions during these stressful economic times.

What to do when you can't pay

Wherever possible, always keep up with your payments. If this becomes impossible, consider turning to your credit life insurance policy instead. Most financial services providers, including DirectAxis, provide this compulsory credit life insurance. What does this mean? The policy covers you and your dependents for either the full outstanding amount you owe on the loan (in the case of death, permanent disability and some dread diseases) or up to 12 months of instalments in the event of retrenchment. This cover usually differs from policy to policy, so it’s best to review the details of yours.

Similarly, you can also enquire with many creditors about the possibility of a ‘payment holiday’ on your repayments. These institutions can usually offer this kind of measure to financially overburdened debtors during this stressful time. You may be allowed to freeze a specific amount of loan repayments to provide a bit more breathing room on your finances in the short-term. But remember, if you choose this payment holiday option, then keep in mind when paying a lesser instalment you could land up paying back a larger loan amount.

Don't ignore the problem

Don’t hesitate to speak up about needing assistance if you aren’t going to make your monthly bills. Credit providers (including banks) are always more willing to assist trustworthy and reliable customers. If you simply stop paying without communication, this may disqualify you from assistance such as payment holidays and grace periods.

What’s worse, simply choosing not to pay may also negatively impact your credit score rating. Why should you be concerned? Unfortunately, because South Africa was recently downgraded by international ratings agencies, creditors will tighten their lending criteria too. The higher your credit score, the easier it’ll be to access loans and other credit-based services. This is an important safety net to have during these uncertain times.

Slow & steady wins the race

The immediate future is not the right time to make spontaneous moves with your cash flow. Instead, find verifiable facts and professional advice before making any major decisions. You can check your credit rating as often as you like (and for free) to find out where you may need to improve your portfolio. Consider your reported status and the options available, then clarify exactly what the specific ramifications may be for your personal circumstances. Now, you can start moving forward. The smallest, calculated adjustments today can mean far greater financial security down the line.

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DirectAxis is a business unit of FirstRand Bank Limited, an Authorised Financial Services and Registered Credit Provider, NCRCP20. Direct Axis SA (Pty) Ltd, Reg no. 1995/006077/07, an authorised Financial Services Provider, FSP7249 & FSP5. 108 De Waal Road, Diep River 7800.

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Loan repayment terms range from 24 to 72 months. The maximum interest rate with regards to a DirectAxis Personal Loan is 24.50% per annum (compounded monthly). Your rate and initiation fee will be determined according to your personal risk profile.

An illustrative example of a loan at an interest rate of 24.50% per annum would be: Loan amount R50 000 plus a once-off initiation fee of R1 207.50 and a monthly admin fee of R69.00, over 72 months.

The total cost of the loan will be R 103 155.57 which is a maximum Annual Percentage Rate (APR) of 27.76%.