How to avoid being dragged into club of debt defaulters

Cushion yourself from huge debts by understanding financial products before signing up. FILE

By CAROL MUNYWOKI

IN SUMMARY
Before signing up for a new product, learn more about pros, cons.

It is sad to see so many M-Shwari loan defaulters. Two things come to my mind; either the users do not know what they get themselves into or they are not patient enough to know how they can use M-Shwari to their advantage.

I remember asking my nieces and nephews to open M-Shwari accounts. The benefits are long-term and building on your credit when you have just turned 18 would be a great way to start thinking of getting into serious business, once one has decided on what they want to venture in.

M-Shwari works just like a credit card, but it is more convenient as you carry out all your transactions via phone. Once you borrow money, make sure you pay at the end of the month or even earlier.

The credit score will keep rising the more you borrow and the more you are on time with your payments. Years down the borrowing and after consistent payments, your credit rating will be so good that you will be entitled to larger loans.

The main factors that will affect your credit rating are your payment history, amount you have owed and the length of time you have used your M-Shwari credit line.

M-Shwari is a good concept—but this is one concept that is only good with time for the user. Once you decide to open your M-Shwari account, try following some guidelines that will make you not get blacklisted or reported to the credit bureaus.

1.Borrow only money that you know you are able to pay.

2.Make payments on time and if possible pay earlier.

3.Keep the account open for as long as you can.

4. If you are running a business get M-Shwari accounts for both your personal lines and your business lines. Good credit comes with a lot of borrowing with consistent payments from a single person.

5.Do not take a loan for entertainment or luxury items, and if you do, take knowing that you can pay on time.

6.Instill and practice discipline when borrowing money.

Banks will be more than willing to lend you money, once they see that you are good at making payments. It is simply about how attractive you are financially and how solid your payments are.

If you are among the 140,000 loan defaulters who have been blacklisted by the Commercial Bank of Africa – don’t give up. You can always pick up the pieces.

Yes, five years is a long time, but it might be a good time for you to reflect on your lending habits, get back to the drawing board to start afresh.