South Africans Must Act Now or Face Bankruptcy

By Staff Writer

With the latest interest rate hike slapping on average R400 a month onto debt repayments, thousands - possibly millions - of South Africans could be pushed into bankruptcy and insolvency unless they take urgent action to curb their spending, manage their debts and slash their budgets, according www.justmoney.co.za - the online guide to money.

Paul Beadle, Managing Director of www.justmoney.co.za, says that although the Reserve Bank cited continued consumer spending as one of its main reasons for pushing interest rates up, traffic on the website reveal a very different picture. He says: "A lot of people visiting www.justmoney.co.za are still looking to borrow money via loans and credit cards, or they need help because they can no longer keep up with their debt repayments,

"Last year we had a string of stinging interest rate hikes designed to halt inflation, but it seems that South African's did not take the hint and carried on spending. So it is clear from the majority of people visiting the website that if they are still spending, they're spending money they don't have!"

Beadle said on average, the 0.5% interest rate hike would put another R350 a month on to repayments of a R1 million mortgage, whilst people borrowing R200,000 for a vehicle loan would have to find an extra R50 a month in debt repayments. Add to that the likelihood of credit card interest rates increasing, food, electricity and petrol prices soaring, plus a possible further interest rate hike, consumers could end up forking out over R1,000 a month more in the next couple of months compared to the beginning of the year.

Even for those who currently still have their heads above water, Beadle says urgent action is needed to keep their finances under control. He says: "People need to start budgeting to ensure that they are not spending more than they are earning; next they should avoid debts as much as possible, and if they have debts, they should pay off their most expensive loans first; and finally they should shop around for cheaper financial services products.

"We know that many people are on the wrong type of bank account, so switching to a more cost effective one could save them R75 or even R100 a month. For people who have not shopped around for cheaper vehicle, home or medical insurance premiums recently, they should do so now. Again they could save thousands of Rands each year on more cost-effective cover, which could be enough to help solve debt problems."

The impact of the interest rate hike

Mortgage costs

The impact on a R1 million mortgage over 20 years (240 months)

1/2% hike (50 basis points)

  • Prime rate mortgage: 0.5% hike from 14.5% to 15% would add an extra R368 per month, increasing repayments from R12,800 to R13,168 per month
  • Average mortgage rate of prime -2%: a 0.5% hike from 12.5% to 13% would add an extra R355 per month, increasing repayments from R11,361 to R11,716 per month

www.justmoney.co.za tip: "Use a comparison website to find cheaper mortgage quotes, because if you are currently paying prime, you could get a new home loan for a lot less." Click here to get advice on finding a cheaper mortgage

Vehicle finance costs

The impact on a R200,000 vehicle loan over 5 years (60 months):

1/2% hike (50 base points)

  • Average vehicle finance at prime +1%: 0.5% hike from 15.5% to 16% would add an extra R53 per month, increasing repayments from R4,811 to R4,864 per month
  • • High value car and a borrower with a good credit record at prime -1%: a 0.5% hike from 13.5% to 14% would add an extra R52 per month, increasing repayments from R4,602 to R4,654 per month

www.justmoney.co.za tip: "If your current car repayments are crippling you, it's better to trade it in for a cheaper model and enjoy the extra cash, rather than get in to repayment difficulties."

If you are stuggling to make your current debt repayments, click here to find out more about debt management

If you own a property, then click here to find out more about debt consolidation

www.justmoney.co.za has been created to help South African's save money by demystifying financial services and helping them to make informed decisions about their money.

Completely independent and unbiased, www.justmoney.co.za also features a host of comparisons, tools and guides, enabling people to search and apply for new products, all online and completely free of charge.

Recent Articles

Featured Debt consolidation – Explained

Dealing with debt can be daunting. If you’re struggling to keep track of which store account to pay next and weighing up which credit card is more important to settle first, you may have considered debt consolation. At Justmoney, we’ve decided to get down to the basics and explain what this entails and what impact you can anticipate on your credit score.  

Read more

3 Vehicle financing options compared – which is cheaper?

Buying a car is a considered a milestone, both in life and financially. Unless you’re able to fork out the cash, many opt for financing. But often the excitement to drive it off the showroom floor overshadows the need to check if you’re choosing the most-suited option. To help you make the best-informed decision we compare available vehicle financing structures in South Africa.

Read more

Splitwise: Split the bill not the friendship

Collecting your friends’ debt to you can be draining. You don’t want to ruin your friendship with them, and it can also be extremely awkward. I don’t know how many times I have written, deleted, and rephrased texts, reminding people to pay what is due to me.

Read more

Stokvel-friendly accounts – which one is fair?

The stokvel economy is approximately worth R49 billion in South Africa. This is according to the National Stokvel Association of South Africa (Nasasa). Altogether 24% of these stokvels are in Gauteng, while only 6% are in the Western Cape.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Cape Town Fish Market Swartland Special

Price: From R123
When: Until 14 July
Where: Cape Town

Aha Casa do Sol Pay 2 Stay 3 Special

Price: R1,200
When: Until 31 July
Where: Mpumalanga

Open University Free Courses

Price: Free
When: Daily
Where: Online