Oftentimes, l have stated here that just as gravity pervades physics, so does risk pervade finance, so you must always be careful not to take on any risk that could break your back.

In other words, financial decisions come with some risk-weighting but because as consumers we often do this weighting sub-consciously we often miss the fine details, leading to complicated mistakes.

Sometimes too, clearly we see the signs of the weight of the risk (burden) we are taking on but we strangely refuse to heed to the warning signs.

To be a bit more provocative, or perhaps to aid the discussions further, let me ask you a few questions: What will happen if you borrow money with a promise to pay back the principal and interest in an agreed monthly instalment and yet you don’t have a regular monthly income?

What happens when you spend more than you earn every month? Or “What is the effect on your finances when you sign up for a loan product with the knowledge that you were going to pay 22 per cent interest per annum and you end up paying 25 per cent per annum?

Yes, when you are on a very tight budget, even one per cent increase in a facility’s rate of interest could spell doom for you. It is that critical.

Over the past years that l have engaged you, the public, on some interesting (hope so!) financial education chit-chat, l have noticed that one area that has kept me engaged with readers constantly is the hidden cost funds.

I have had questions and often complaints on what is often termed as a ‘hidden’ cost on a financial transaction.

Read what one reader sent to me: “I applied for a loan from a financial institution after they had assured me that the loan was to attract interest at the rate of 35 per cent per annum.

Looking around, l noticed that most of the financial institutions in the same league as the one l was applying for the facility from had much higher interest charges, so l applied for the facility.

I was asked to pay some deposit or that some part of the loan would be retained from the amount to be disbursed, which l did.

Now, after l had completed the process l noticed that other charges, like insurance and administration fees had been added, taking the monthly instalment above what my budget could support.

At that point l had made commitments and therefore could not pull out; there were other people waiting for the funds to support a crucial activity.

I got the money all the same, but the problem for me now is that l ended up with more debts than l had anticipated.

I am pretty sure that there are several people who have experienced what l had been through and therefore it is about time that the banks were made aware that such appalling practices must be stopped”.

Well, largely, even though we will say under a normal sale of goods contract that it is always ethical to let buyers be aware of what they are actually signing up for or buying (caveat emptor), in banking and, indeed, in most financial transactions we would rather say that you must always ensure that you read the small prints!

The small print is where the hidden charges are. The other conditions attached to the facility are often not as boldly displayed as the issues that give competitive advantage.

Remember that a loan is the financial transaction that exists between you, the borrower, and the lender who agreed to give you a certain amount of money with the expectation of total repayment.

You must agree to the repayment terms including the amount owed, interest rate and due dates. The lender can ask for interest payments in addition to the original amount loaned. It is indeed within the right of the lender to do so.

The loan agreement is the formal contract between you the borrower and the lender. It is legally binding and its main purpose is to clearly define what both parties are agreeing to in terms of establishing the working relationship and what responsibilities each party covenants to perform for the duration of the loan.

This arrangement is usually to the advantage of both the lender and the debtor and both parties run into problems when it is not respected.

So, if you feel disadvantaged right from the onset, like the example above, you have the right to reject the agreement.

Don’t put yourself in a disadvantaged position because you need the cash; this could spell lifelong troubles for you.