You can negotiate with your bank to get the best deal on your bond or car financing, writes Belinda Beresford
Waking up after the night before, that faint hint of an ache in your forehead is a disagreeable reminder of the pain to come as the hangover hits with full force.
Its the same wincing anticipation of impending unpleasantness that any South African with debts must now be feeling, as the banks prepare to put their lending rates up again.
One symptom of how uncertain the banks are in the present volatile financial environment is the recent disappearance of capped bond rates for new customers among the big banks.
Capped bonds are home loan agreements with a ceiling on the interest rate for a certain period.
By the beginning of the week, Nedcor, First National Bank and Standard Bank had temporarily suspended new fixed home loans, and this discretion is likely to spread to the other banks.
Under fixed home loan agreements the interest rate is set for a period of time and will not fluctuate either up or down.
Fixed bond rates are not always a good choice since youre betting on what interest rates will do. They could come down again, in which case youll be stuck paying a higher rate than someone with a flexible bond.
According to Saambou Bank, fixed rate loans tend to be chosen by people who want to budget carefully and avoid any financial surprises.
If youre shopping around for a home loan, dont forget to look at the smaller and niche banks. Also consider talking to your bank about your bond: NBS Boland, for example, has said it will consider renegotiating home loan deals with clients in difficulties.
Fixed rates are also available on other loans such as car financing. But remember the fixed rates are a gamble for both you and the bank and you may have to pay much higher rates for the benefit of certainty. The extra cost could outweigh further interest rate increases.
You could also think about realigning your investment portfolio, bearing in mind that many investments are medium to long term.
As a rule you should be leaving money in unit trusts for at least three years and direct stock investments should stay even longer.
But dont be too rigid if you really need the money, or if youre in a truly disastrous performer in a sector which does badly at this point of the economic cycle. It could be worthwhile to liquidate some investments to pay off debts.
You could also consider adjusting your investments to provide some protection against a possible recession and a falling rand.
Overseas investments would allow you to take advantage of the declining currency, since any foreign dividends repatriated to South Africa would tend to be boosted by the exchange rate.
If youre one of the careful few (undoubtedly someone who takes personal finance advice to heart) who has no debts, you should be grinning happily at the anticipation of good returns on your savings.
But dont get too cheery, because the implications are rather all-encompassing, especially in conjunction with the weak rand.
Costs of imported goods are likely to go up so buy your whisky, perfume and computer products as soon as possible, before the effects of the rands swift downward spiral kick in.
If youre convinced the rand is likely to weaken further, you could consider buying foreign currency for your holiday as soon as possible.
High interest rates have a depressing effect on the economy, with some sectors being hit before others.
There is likely to be a rise in the number of liquidations and bankruptcies.
This is particularly bad news for smaller companies or those with tighter cash flow problems.
Rising bad debts mean companies have to tighten up on credit control, which also means consumers could find it harder to get credit.