11/04/2008

CISA signed into law, in time for current global financial crisis

It is said that the current global financial crisis could be linked to the delinquent borrowers.

Last October 31, Friday, President Gloria Macapagal Arroyo signed into law the Credit Information System Act(CISA). The Law will create “a centralized credit information system that can be used by lenders to asses the ability of an individual or a corporation to pay loans.”

The law will create Central Credit Information Corporation – which will be chaired by SEC – to run the system. Borrowers with history of delinquent payment of loans will be denied of another loan application thus preventing financial institution of unnecessary risks.

The Central Credit Information Corporation will have an “authorized capital stock of P500 million. 60% of the shares shall be owned by the government and it will dispose 20% of it after five years. The remaining 40% will be offered to qualified investors provided that no single group will own more than 10% of the capital stock.

I believe this Act will help us become more responsible borrowers/credit card holders.

Alvin T. Tabanag – founder of Pinoy Smart Savers Learning Center – gives the following tips on how to stay out of huge debts:

1. Do not borrow money to buy things you don’t really need. A most efficient way ro accumulate huge debt is buying a lot of things you can live without. Do not abuse your credit card. Don’t use it to support a lavish lifestyle. Borrow money only for important things and for emergencies. A simple rule to follow in using your credit card: Do NOT use it to purchase something that you cannot afford to pay in cash. If you want “something nice” to have but unimportant, save for it instead of buying on credit.

2. Keep only one or two credit cards. The more credit cards you have, the more likely you will spend, and the bigger the possibility you can get into debt trouble. If you have more than a couple of credit cards, retain the ones with the more favorable terms and transfer the balances from the other cards. Get a pair of scissors, cut-up the unwanted cards and inform the concerned credit card companies that you will no longer use their card.

3. Treat your credit card as if it is cash. Buying with credit cards doesn’t feel like spending real money which makes it easy to spend more than you have to. Treat your credit card like cash so you will spend less. Set a limit as to how much you will charge to your credit card monthly and do your best not to exceed it.

4. Pay more than the minimum. Paying only the minimum every month will contribute in growing your credit card-debt to unmanageable levels. If you charge P3,000.00 monthly in your credit card and pay only the minimum, in 20 months you will have paid close to P29,000.00 and your outstanding credit card balance will be over P50,000.00

5. Use other sources of money to pay your debt. Be imaginative in finding money for debt payment. If you have money “sleeping” in a low-interest savings account, use it to pay your debt. Would you rather pay 3.5% in credit card interest monthly than give up one percent in deposit interest annually? I don’t think so. Consider taking out a less expensive loan to pay your existing loan obligation. But never borrow money that charges interest that’s higher than wht you are paying now.

6. Get yourself and your family insured. The wisest spender is not immune to unfortunate incidents like accidents, sickness and untimely death, which can give your finances a major wallop. Protect your family from financial losses and potential heavy debt by getting yourself and your family insured. At the very least you should have a life insurance and healthcare or hospitalization insurance.


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