#MoneyLessonOfTheDay
Once again,in a bid to stimulate the economy,SARB cut interest rates. This is the lowest repo rate we& #39;ve had in forever. For many of us, rate cuts are amazing because they directly translate to cheaper credit. But forgive me for what I am about to tell you..

1. Just because credit is cheaper does not mean credit is now easily available. Neither does it mean that this current tide will stay the same. So do not over extend your credit responsibilities because when the upswing comes, you will find yourself in the red. Don& #39;t also be...

2. pennywise and pound foolish. Which brings me to the main point of today& #39;s lesson and this thread.

DONThttps://abs.twimg.com/emoji/v2/... draggable="false" alt="👏🏾" title="Applaus-Zeichen (durchschnittlich dunkler Hautton)" aria-label="Emoji: Applaus-Zeichen (durchschnittlich dunkler Hautton)">APPLYhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="👏🏾" title="Applaus-Zeichen (durchschnittlich dunkler Hautton)" aria-label="Emoji: Applaus-Zeichen (durchschnittlich dunkler Hautton)">FORhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="👏🏾" title="Applaus-Zeichen (durchschnittlich dunkler Hautton)" aria-label="Emoji: Applaus-Zeichen (durchschnittlich dunkler Hautton)">A https://abs.twimg.com/emoji/v2/... draggable="false" alt="👏🏾" title="Applaus-Zeichen (durchschnittlich dunkler Hautton)" aria-label="Emoji: Applaus-Zeichen (durchschnittlich dunkler Hautton)">NEWhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="👏🏾" title="Applaus-Zeichen (durchschnittlich dunkler Hautton)" aria-label="Emoji: Applaus-Zeichen (durchschnittlich dunkler Hautton)">LOANhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="👏🏾" title="Applaus-Zeichen (durchschnittlich dunkler Hautton)" aria-label="Emoji: Applaus-Zeichen (durchschnittlich dunkler Hautton)">TO PAY OFFhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="👏🏾" title="Applaus-Zeichen (durchschnittlich dunkler Hautton)" aria-label="Emoji: Applaus-Zeichen (durchschnittlich dunkler Hautton)">AN EXISTING ONEhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="👏🏾" title="Applaus-Zeichen (durchschnittlich dunkler Hautton)" aria-label="Emoji: Applaus-Zeichen (durchschnittlich dunkler Hautton)">.

Here& #39;s why:When you apply for a credit line, there& #39;s three amounts to note:Principle,cost of credit &total amt

3.Your principle is the the amount your are borrowing. Cost of credit is interest, fees and or penalties. Total amount is COC + Principle. Now, if you decide to settle your loan before the agreed period, you are liable to a penalty fee that is a few months COC plus a little extra

4.This penalty fee is added to the unpaid principle you still owe. Keep in mind that when paying back any loan, the bank recoups its interest first before recouping the principle. So unless you& #39;re settling a loan in the last 6 months or so, chances are you will still have a...

5.sizable principle to pay off.

Now, someone then comes and tells you to apply for a loan to pay off an existing loan to save on interest. This wont save you any money because each loan has its separate COC. Here& #39;s an example:You have a loan fo R20k and decide to settle it.

6.Your settlement quote is given as R11k. You then decide to apply for a new loan to settle the R11k. Based on the blue bank& #39;s loan calculator,you will end up paying R14 256. But here& #39;s where it gets expensive:Your settlement quote of R11k has a penalty fee (remember?)

7. So you end up paying penalty fee + COC on the amount you borrowed to settle the initial loan. This would work if when you borrow R11k,you pay back exactly R11k with no interest or charges.

Rather approach the bank to negotiate a reduced personalised rate if isnt auto applied