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Why it's important to understand how credit works

It's always better to save up for something and pay cash, but we know that's not always possible.


Understanding interest

There are two types of interest: interest earned (on savings and investments) and interest charged (on loans).

Interest earned

This type of interest is a way to grow your money and is a reward from the bank for saving your money with them. It's extra money you earn for saving your money with a bank or an investment/savings institution.

Interest charged

This is the type of interest charged by a credit provider to lend you money. It's the cost of credit and is usually calculated as a percentage of the amount that you borrow.

Compound interest (earned)

When interest is calculated on the original investment and interest earned, so you earn interest on your interest, helping your money grow quicker.

Compound interest (charged)

When interest is calculated on the original amount borrowed invested plus any interest charged in previous months or years so you are charged interest on your interest, meaning your debt grows over time.

Understanding instalments

Instalments refer to a set amount you pay for an item over an agreed period. Often, we are attracted by special offers and low monthly instalments that look like very good deals. But 'low' instalments can be deceiving.

It is important to look at the total cost you will pay by adding up the monthly instalments over the payment period. You may find you will pay way more than the cash price. Always check before agreeing to the instalments and where possible, save up and buy the item in cash.

Remember: Check if you are being charged for extras such as delivery, credit life insurance, etc. You have a choice not to take up insurance if you do not want it.


Where to borrow money

If you are planning to borrow money, there are lots of different places that you can borrow from including: banks, micro-lenders, shops and informal (unregistered lenders) such as loan sharks.

All these places offer different products and their terms and application requirements differ. The risk associated with each lender also differs, so think carefully before signing an agreement or contract.

Where to borrow money

Before you take up credit

Taking up credit is a big decision. Before you do, consider the following:

Obtain a quote from the credit provider. It should show how much you will be paying in total.

Find out if there are penalties or rewards for repaying the debt earlier.

Get a copy of the contract and read it at home before you sign.

Make sure you understand the terms of the agreement.

Find out what will happen if you are unable to make the loan repayments on time.

Understanding wants & needs

Bad credit

  • Borrowing for wants - e.g. new outfit for an event when you have clothes you can wear.
  • Borrowing for consumables - e.g. borrowing to buy groceries, airtime, etc. If you constantly need to borrow money before month end, you may need to adjust your budget and cut out some expenses.

Good credit

  • Borrowing to buy assets that grow in value over time, e.g. a house.
  • Borrowing for personal growth for you or a family member, e.g. student loan.

Understanding legal protection and credit reports


Legal protection

When taking out credit you have rights.

Read more

Credit Report

Credit bureaux keep credit-related information of all credit-active consumers, this information is compiled on a credit report.

Read more

Legal protection

There is no shame is asking for help to manage your debt. It is better to get help than to drown in debt.


  • The right to apply for credit or a loan.
  • Not be unfairly discriminated against when applying for credit or a loan.
  • Read a credit agreement in plain language.
  • Have a copy of the credit agreement BEFORE taking the loan.
  • Privacy regarding your personal information.
  • Complain if you think you have been treated unfairly.
  • Check your credit profile once a year. You can do this for free once a year with a credit bureau. You can find a list of credit bureaux that will give you a free annual credit check on This website gives contact details for all the credit bureaux that are members of the Credit Bureau Association.
  • Ask for help from a debt counsellor to assist with restructuring your debt.
  • Know why a loan application has been rejected.
  • Your rights as it relates to credit is protected under the National Credit Act and the National Credit Regulator can assist customers to get help when their rights have been violated. If you have a concern or a problem about the way you have been treated in accessing credit, contact the NCR. Their telephone number is 0860 627 627 and their website address is

    Office of the Banking Adjudicator

    Physical address:
    Plot 184 Ist Floor,
    Tlale House Main Mall , Opposite BEDIA.

    Postal address:
    Office of the Banking Adjudicator
    Private Bag 00404

    Tel: (0267) 3935409
    Fax: (0267)3935406


    Credit Report

    Credit bureaux keep credit related information of all credit-active consumers, this information is compiled on a credit report or credit profile. Credit grantors submit payment information to the credit bureaux on how well you are repaying your loans. The information submitted is both positive and negative information. The purpose of a credit report is to allow credit grantors to determine if you are eligible for credit, by assessing the amount of credit you already have and also looking at how well you repay existing loans. It is a risk for companies to give you a loan, therefore they must ensure that you can repay it.

    You can get a free copy of your credit report once a year directly from the credit bureaux:


    Call Centre on 0861 514 131
    Online at

    Consumer Profile Bureau


    Call Centre on 0861 105 665
    Online at


    Plot 115 Unit 21 Kgale Mews, Gaborone, Botswana
    Private Bag 305, Gaborone, Botswana
    Phone: 0267 390 3535
    Fax: 0267 318 1124


    Call Centre on 0860 937 000
    Online at

    Action creditors can take if you do not make payments


    The seller takes back the goods, as well as keeps the money you have already paid for the goods.


    A judgement is a court order that forces you to repay your loans.

    Attachment of property

    Depending on how big your debt is, the court can order that some of your property (such as furniture, a vehicle, etc.) can be repossessed.

    Garnishee orders

    The court will instruct your employer to pay a part of your wages or salary to the creditor as repayment of your debt.

    Types of expenses



    You are over-indebted if you are failing to meet your debt repayments and constantly need to borrow to support your monthly expenses.

    Read more

    Debt counselling

    There is no shame in asking for help to manage your debt. It is better to get help than to drown in debt.

    Read more


    You are over-indebted if you are failing to meet your debt repayments and constantly need to borrow to support your monthly expenses.

    What can I do if I am over-indebted?

    a) The first step is to write a list of all the people and businesses that you owe money to.

    b) Contact your creditors and explain your situation.

    c) When creditors write to you, take their letters seriously and respond.

    d) Do not promise to make payments if you cannot afford them. Rather explain the situation and look at making smaller payments over a longer period.

    e) Avoid taking more loans to pay the debt you already have

    f) Change your lifestyle, cut down on things like entertainment, alcohol, cigarettes, gambling, etc.

    g) If you drive an expensive car, consider downgrading to a more affordable car or sell your car and use public transport.

    h) Avoid buying groceries on credit.

    i) Consult a debt counsellor. Call the National Credit Regulator (0860 627 627) and they will refer you to a debt counsellor near you.

    Debt counselling

    There is no shame is asking for help to manage your debt. It is better to get help than to drown in debt.


  • When you are under debt counselling, creditors may not take more action against you.
  • There is no permanent record of having undergone debt counselling.
  • There is only one monthly repayment to be made.
  • Your budget will meet your basic needs (housing, transport, food) first before making provision for your debts.
  • You will never pay more money than you can reasonably afford.
  • A debt counsellor will suggest ways of cutting costs and saving money.
  • You will no longer get calls from your creditors demanding payment. This will lessen your stress and allow you to focus on fixing the problem of getting out of debt.
  • Disadvantages

  • You are not allowed to have more credit while undergoing debt counselling.
  • It does cost a little bit of money, payable to the debt counsellor. These fees are regulated and set by law.
  • Your debts will take longer to pay off because of paying smaller amounts each month.