Lifeline for debt-slaves

By Staff Writer

From iAfrica.com

30 April 2008

From December to February the number of summonses for debts fell 11.3
percent while the number of judgements fell 10.3 percent. Of the R560.7-
million worth of civil judgements, the largest portion can be attributed
to judgements involving money loaned and owed to promissory notes and
other debt acknowledgements which include money owed through credit card
debt.

Debtbusters MD Luke Hirst said he was very pleased with the news that
South African banks seemed to be stepping off.

"This is great news for South Africans under pressure. It's a sign that
local banks have bought into the debt counselling process and have come
to realise that there is more to gain from negotiating with the consumer
than heading straight to court."

No other option

He said that it is important to remember that people who apply for debt
counselling aren't doing so because they want to ease the pressure of
paying off their loans, but rather because they have no other option.

"Many people who apply for debt counselling are just a few steps away
from full on administration - a position in which neither the client nor
the banks will benefit. By utilising debt counselling, the client is
acknowledging that they intend to pay off the money that they owe and
this alone should be enough to encourage banks to broker relationships
with debt counsellors."

With one more interest rate hike expected this year, Hirst said it was
important for South Africans to review their finances immediately if
they thought they may be under any sort of financial pressure.

"If you are struggling to make ends meet now, another rate hike could
put you into very deep trouble. Consult a registered debt counsellor if
you have any apprehensions about your current financial situation."

Debt review - an example

How can the debt review process help a consumer who cannot afford all
his monthly debt repayments? Here is an example:

The consumer, Mr AN Other, is single and is employed on a full time
basis with a net salary of R6500 (five percent annual increase). He does
not have a lavish lifestyle and his monthly expenses, excluding debt,
average around R5000. Mr Other is left with R1800 for servicing his debt.

Mr Other has two personal loans, two credit cards and three store cards
with a total outstanding balance of R58 533 and an expected monthly debt
instalment of R3952. This means that after expected monthly debt
instalments Mr Other has a negative balance of R2152 and is therefore
over-indebted.

Due to his over-indebtedness, Mr Other can apply to be placed under debt
review by a registered debt counsellor. The debt counsellor will advise
the credit bureaus and Mr Other's credit providers and will restructure
the debts so that Mr Other can afford to pay them, using the available
R1800.

Using the R1800, Mr Other can be out of debt by January 2012. (This
example does not take into account debt counsellor fees, which vary. A
debt counsellor must advise the client of the fees before the client
applies for the debt review.)

The advantages of debt review

Clients avoid debt administration and sequestration and therefore incurs
fewer costs.

After the debt review is complete and the client has paid the debts, the
credit bureaus clear the client's credit record. With administration, the
black mark stays on your record for a number of years afterwards.

Recent Articles

Featured Do you need credit to survive Easter?

Easter weekend is here and with it the expectation of celebration. While there is nothing wrong with this, it often means spending more money than you bargained for.

 

Read more

Young woman building a legacy brick by brick

When her dad passed away, Siyasanga Ngcongca, an internal auditing graduate, took over the family business. Ngcongca Construction, as her company is known, is a service provider to five insurance companies, handling building and commercial claims.

Read more

Can you evict paying residential tenants?

One of the most common reasons for wanting to evict a tenant is non-payment of rent. But there are many other situations that landlords may encounter. These can range from damaging property and breaching contract, to being reported as a continuous disturbance by neighbours.

Read more

How one entrepreneur designed her financial future

From as early as Cannon remembers, she recalls her grandmother seated behind a sewing machine. Through this influence she was sewing her own aprons and doll dresses by the time she was ten, and by the time she was 16, she started designing and make her own clothes.

Read more

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Woodstock Grill and Tap Monday Burger Madness

Price: R75
When: Mondays
Where: Cape Town

Active Sushi Special

Price: R199
When: From Tuesday to Sunday
Where: Cape Town

Let's Teach and Travel TEFL Online Course

Price: R2,400
When: Daily
Where: Online