AS the recession hits, more of us will turn to credit for survival.

It doesn’t matter if you’re looking for a 20-day loan or a 20-year bond, it’s important to be smart about the risk you’re taking.

To understand credit management better, Mellony Ramalho, executive for sales of the branch network at African Bank had some advice for SunMoney.

Ramalho said: “If you are considering a loan, one of the first things you should do is speak to a financial adviser.

What does a financial adviser need to inform you about?

Understand the cost of a loan

When you are shopping around for a loan, make sure that you are comparing apples with apples. The true cost of a loan takes into account the interest added to amount borrowed, as well as any and all other charges, and when the payments are due.

Some banks say they offer preferential rates to their current account customers but you might still find there are more affordable loans available elsewhere.

Your credit rating and small print

Before applying for a loan, check your credit rating. This can be done once a year, free of charge through one of the credit bureaus.

If your credit rating is not in good shape, you may be offered a more expensive deal.

Also, before you apply for a loan, check the small print to see if you’re eligible.

Early payment charges

Some lenders charge you special fees if you pay back your loan earlier than the time you both agreed upon.

Check how much this charge is before you apply for a particular loan.

You could save more by borrowing more

In general, the larger the loan the lower the interest rate. So, there’s a chance that you may actually save money by borrowing slightly more. By increasing your loan by an extra R500 may bump you up into a better interest rate bracket, which may save more money over the repayment period.

Don’t pay off debt with credit

Being in constant debt to many different credit providers makes you look like you’re in struggling financially. This makes you look as if you’re a risk.

Speak to your financial adviser and apply for a loan you can afford.