One of the biggest problems facing the average South African is the inability to save for a rainy day. Unlike our foreign counterparts, the majority of us simply don’t see or understand the need to put away the extra pennies. You may argue that times are tough and there is no extra cash to save, however, the adage every cent counts rings particularly true, even in a cash-strapped society going through difficult times. One of the easiest ways to save, without bankrupting yourself in the process, is through your bond. Paying a little extra on your bond repayments has huge benefits for homeowners both in the short and long term. The current crisis has caught many off guard, who are now over-burdened by debt.The bond was often the first commitment that was overlooked by struggling households. It stands to reason that anyone who had been paying extra into their bond accounts would be in a far more favourable position with the banks than those that had just eked out the required payment on a monthly basis. Banks want commitment and those who paid more certainly showed that they were serious about servicing the debt. The benefits gained by paying a few hundred rand off a bond on a monthly basis are staggering. For every R100 000 that is borrowed an extra R100per month on the bond repayment instalment will reduce the loan period by approximately seven years, reducing the loan term from 20 to 13 years. The amounts saved will vary according to interest rates as well as the rate that the homeowner is actually being charged by the bank. However, when the amount is calculated using todays interest rate of 9% on a homeloan of R1m, paying an extra R1000 per month will eventually save the homeowner an estimated R760 000. Although relatively speaking the figures drop in the lower price ranges, the savings are just as significant. Homeowners who have a bond of R500 000 could, using the same formula given above, save themselves something in the region of R378 000. It stands to reason that if any of the homeowners who have lost their homes were asked if they would do anything different, the answer would undoubtedly be they should have seen this coming and planned accordingly; and that is the trouble with recessions – no one, not even the highest-qualified economists, see what the future holds. The good news is that however bad things appear, history has taught us that situations do ultimately improve. The 1929 crash was the worst crisis to ever hit the planet and although the bread queues were long, they eventually disappeared as the American public found their way once again. The piggy bank on the dresser could make all the difference between success and failure. Putting some of your hard earned cash away and giving up a few luxuries in the good times is far more desirable than seeing what you have worked so hard to attain vanish in the bad times.
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