The world is not as honourable a place as it should be, sadly, which means that instead of taking people at their word, we often have to put legal contracts in place – for both parties’ protection. And often, because the words are big and the print is small, we just sign on the dotted line and hope all will be well.
You will sign many contracts in your life, but these are some of the important ones: knowing how they affect your life can save you months of frustration and potentially, a lot of money too.
Store credit cards
A retail store credit card is probably the easiest type of credit to procure, but not many people understand the long-term consequences of this kind of debt. First, the interest rates are very high. Second, if you don’t pay on time the store will charge penalties. And if you default on the payments you will be blacklisted at the credit bureaus.
Car loans
There are several ways to finance a car. As with all finance contracts, the longer you borrow money, the more interest you pay, so try and save up a large deposit and keep the repayment period as short as possible.
Be very careful of all the extras they will try to sell you like extended warranties and things you really don’t need. Residual or balloon payment leases look attractive because the repayments are reduced but this is an expensive way to finance a vehicle and you may have to pay money into the lease to resell the car.
Antenuptial contract
The last thing you want to worry about when marrying the love of your life is divorce. But an antenuptial contract (ANC) also protects you if your spouse dies.
There are three types of contracts: in the community of property (COP), ANC with accrual, and an ANC without accrual. If you don’t sign up for one of the last two options, you will automatically be married in COP. This joins your assets with your partner’s assets and what’s yours is theirs and what’s theirs is yours.
This is not a recommended way to get married. Most people choose an ANC with accrual, which means when you get married you own your stuff, he owns his and you share anything that you accumulate while in the marriage.
Home loans
If you buy a home, it will probably be the biggest financial outlay you make. Make sure you know what you are getting, and are fully aware of the conditions of purchase – especially if you are buying ‘off plan’.
Paying a lawyer to go over the contract is well worth the money because once you’ve made the offer, you have a five-business-day cooling-off period, but after that, it’s a done deal.
Investments
One of the biggest mistakes people make when purchasing an investment like an endowment policy or retirement annuity is to think they can either stop paying or cash it in at any time. There is a strict set of rules around investment purchases and when and how you may stop them, so ensure you have asked those questions before you commit to them.
Also, make sure that you know exactly how your money is going to be invested: insist on written documentation and a detailed explanation of how the investment is structured and what kind of returns you can expect to achieve. Only invest money with large well-established financial institutions.
Risk products
Life, home and car insurance fall into this category and this is the area where many disputes come into play. If you don’t hold up your side of the bargain the claim can be rejected, and there are many, many rules and conditions, so ignore them at your peril!
Pay particular attention to “exclusions”, as these are the clauses that most people come unstuck with.
There are of course many more contracts that you will have to sign in your life. Take the time to read the Latin bits, and consult with experts – it will save you money, time, and heartache.
