Debt is like cholesterol, you need the good one and you really, really don’t need the bad one. Just like cholesterol, good debt can help you get where you want to be, while the bad debt can pull you under and leave you struggling through life.

Most people will have to borrow money at some stage, whether it’s to buy a house, a car or even just to fund an unexpected expense such as a medical bill, just as most people will have to manage the effects of cholesterol. The best way to do this is to ensure that neither the debt nor the cholesterol have a long-term negative impact on your lifestyle.

The best advice we can give you to manage your cholesterol is to live a healthy life style, eat enough fresh fruit and vegetables and do at least 30 minutes of exercise every second day. However when it comes to debt, we suggest you consider these 6 issues before signing that contract.

1. Budgeting

If you don’t have a budget, put one together that takes stock of your income and expenses – remember to set aside some cash for small purchases such as snacks, coffees etc. Use your budget to determine where you can save, or what you would have to forego in order to afford the debt.

2. Borrow as little as possible

Borrow only as much as you need, and the smaller the amount you borrow, the lower your repayments will be. That little extra to “tide you over” could have a devastating effect on your budget over time as interest takes its toll.

3. Choose carefully

While there are not a wide variety of financial institutions in South Africa, you do still have a choice of who to go to. Once you know how much you will need to borrow, apply at as many institutions as you can to find out which one will offer you the best value for money. Take note of the terms and interest rates and always read through the small print before signing any loan agreement.

4. Ensure you keep up with your repayments

Keeping up with monthly repayments ensures that your credit record remains positive and will allow you to obtain finance for bigger items – for example, if you bought a car on credit and ensured the payments were up to date, getting a home loan would be that much easier. If you find yourself in a situation where you are unable to maintain the repayments due to unforeseen circumstances, speak to your creditor and see if you can rework the terms to suit your budget until you can return to paying the higher amount.

5. Your home loan should be your top priority

Whatever you do, do not skip your home loan repayments. This will probably be your biggest asset, so it is important that you do whatever you can to ensure that you keep up with these payments. If possible see if you can increase your payments by a few hundred rands every month, as this will help bring the interest amount down – and if the Reserve bank’s interest rate is increased, you are ready to manage that increase.

6. Keep a record of all the relevant documentation

Keep all you credit documentation together. Make a file for each credit arrangement and keep both the contract and receipts in this file. You can also store your documents digitally in the cloud so that you can access them when needed.