Photo Caption: Shanna Kaye Wright Vaughn, youth and education programmes lead at the JN Foundation
Although it’s advisable for young adults to avoid debt, Shanna Kaye Wright Vaughn, youth and education programmes lead at the JN Foundation, said if they must borrow, they should be smart and intentional about how they borrow. She gave the advice recently in observation of ‘Get Smart About Credit Day’.
‘Get Smart About Credit Day’, observed on October 19, is an initiative adopted from the American Bankers’ Association (ABA) Foundation.
Mrs Wright Vaughn says when borrowing, young people must exercise caution and be very vigilant about managing debt. She noted that a properly managed loan can actually provide opportunities to improve one’s financial future.
“You can use credit to improve several areas of your life,” she said while noting that there are several loan options targeting different people.
She said young people should try to avoid taking on multiple loans as this may damage their financial situation, rather than help it. She also cautioned against using certain loans for lifestyle situations like parties, which provide no long-term financial benefit.
“We want young adults to think about their long-term goals, such as becoming a homeowner. It’s probably not wise for you to take out a loan to attend a party at this time, unless you can definitely afford to or if you are also saving which we also do encourage, because saving can be a backbone for your loan engagement and your loan conversations,” she said.
Mrs Wright Vaughn said one of the most important things people should consider when seeking a loan is what they have to lose, in the event they cannot repay. “As young people, sometimes we don’t have the assets, or security to back up a loan, and so an unsecured loan may be the better option. A lot of facilities will encourage unsecured loans to young people because they are easier to access,” she said.
She also recommended that people prepare a budget before taking on any loan, as they can negatively affect credit worthiness if they go “bad.”
While the concept of credit scores is still relatively new in Jamaica, it’s not novel and a bad credit score can impact an individual’s borrowing power and future business with other organisations. There are currently three credit bureaus in Jamaica and Jamaicans can access one free credit report each year.
“You can’t be earning, for argument’s sake, J$100,000 monthly and you’re paying back J$60,000 for one particular loan, while also having other things like a student loan or other family members to take care of,” she stressed.
She also urged people to not shy away from asking the ‘hard and fast’ questions before making a decision on any loan facility.
“It doesn’t matter if it seems like a weird question or a hard question. You may want to ask about interest rates if you’re not a numbers person, and you also want to look at the penalties for late or even early payments,” she noted.
The JN Foundation youth and education programmes lead said research is important, particularly for first time loan applicants. This, she said, will ensure people don’t find themselves paying more than they should, advising that it’s good to shop around. She said it’s also wise to read the fine print before signing a document.
“You’ll want to ensure that there’s no penalty that’s going to affect any other areas of your life. Ensure that when you’re signing a particular document, it’s not saying that in the event something happens to you, there’s no insurance. All of these things must be a part of the conversation that you are having,” she warned.
‘Get Smart About Credit Day’ is celebrated on the third Thursday in October each year in the United States. The annual initiative by the ABA Foundation is aimed at pushing conversations and tips to guide youth towards better credit and savings habits. The day falls in line with the work of the JN Foundation, which has also been providing information, training, and mentorship to youth to help them make better financial decisions.