As the country braces itself for a possible wallet-busting 2% increase in interest rates this week, research by www.justmoney.co.za, South Africa's online guide to money, reveals that 25% of people would skip a payment if they could not afford their monthly debt repayments.
However, www.justmoney.co.za says that missing a debt repayment is usually a clear sign that consumers become over-indebted, warning that if South African's bury their heads in the sand and hope they can pay their bills later, they might end up losing their homes, their cars and all of their valuable items.
Paul Beadle, managing director of www.justmoney.co.za, explains: "When people skip a payment they think they will catch up the following month, but by then the amount they owe is twice as much. It's a slippery slope towards bankruptcy, so South African's must tackle their over-indebtedness and talk to their bank or credit provider as soon as they see a repayment problem.
"What is also worrying is that more than one in ten of the people surveyed said that if they could not afford their debt repayments, they would try and borrow more money to make the payment. That's just compounding the problem, adding more debt on top of existing debt."
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Visitors to www.justmoney.co.za were asked: If you could not afford to make your monthly debt repayments, what would you do?
- 25% said: Miss a repayment and try to catch up the following month
- 13% said: Borrow more money to be able to make the repayment
- 43% said: Tell my bank or lender that I have repayment problems
- 19% said: Go and see a debt counsellor for immediate help
Luke Hirst, managing director of debt counsellor and www.justmoney.co.za partner DebtBusters, says that consumers must not hide from their debt obligations because it makes the problem worse. He says: "If people are struggling to meet their repayments they must speak to the credit provider first to advise them of the situation. The last thing a bank or lender wants is for the consumer to become bankrupt because they are then unlikely to ever get paid.
"Credit providers are getting better at restructuring payments, but they do not delve into the client's financial situation like a debt counsellor would do. This means that even when a credit provider restructures the amount there is no guarantee that the client can afford it. A debt counsellor looks at the complete picture as well as assessing for reckless lending. Also a debt counsellor should go through a client's budget to see where savings can be made, which means more spare cash to pay off the debt."