Guiding consumers since 2009

Is your Debt taking over?

By Staff Writer

 

Is your Debt taking over?

Debt counselling might be your helping hand to a better lifestyle...

Many South Africans are falling deeper into debt especially with the economic decline, interest rate hikes and increases in petrol, electricity and food costs. Such increases have outpaced salary increases and are increasing the pressure.

According to a recent report by Financial Mail Weekly, Paul Slot - director of Octagen audit firm- estimates that almost 400 000 South African consumers are in debt and in serious trouble. These numbers are also increasing at an alarming rate.

According to Slot, an individual should be paying no more than 35% of their monthly income on repayments. However on average, the figure for repayments is sitting at 48% of one's monthly income. If you spend more than 50% per month you are in serious trouble.

Financial stress not only affects your financial well-being but also reduces productivity and may be a cause of serious stress related health problems. Creditors and debtors who pursue relentlessly can be extremely stressful not to mention harsh, and people are dealing with them directly.

Many did not foresee a dramatic downturn in the economy and according to Slot, ,many financial mistakes have already been made. Some main mistakes include the option of taking out a loan to pay back debt as this only increases the amount owed in the long run. People have three to five credit cards, are only paying back the minimum and are therefore accumulating large debts. Most people do not have a budget and financial hardships are not being monitored.

However, there is hope. Debt counselling allows one to use the lifeline that may prevent them from falling short due to debt. This is part of a process called "debt review" where the consumer is declared as over indebted and has his or her debt obligations rearranged within court approval. The consumer is therefore not declared bankrupt.

Debt counselling is not the same as debt sequestration or debt consolidation. You are not required to hand over your finances to a third party nor sell off your assets to cover your debts. With debt counselling you are left with your assets and are still able to obtain credit within the future. With debt counselling, your debts are rearranged and a credit payment plan is organised with your credit providers. This provides you with the breathing space you need to cut back on your expenses, cut down on lifestyle costs and to get back onto your feet.

Once you have applied successfully for Debt counselling: You will be listed with the credit bureau as being under debt review. Once you have cleared your debt it will then be removed from your record and you will be able to access responsible new debt.

According to Slot "debt counselling is about bringing people back into the economy with a better understanding of the sound financial principles. It allows creditors to recover part , if not all, their money with some interest. The alternative is expensive legal action with very little or no recovery of the debt". A mind shift needs to be found among creditors as their role is critical to the process.

 If you are looking for a debt counsellor you should check that person has been registered and trained by the National Credit Regulator. The most important advice we can offer you here at Justmoney.co.za is to take charge of your debts sooner rather than later, and debt counselling will help get you out of trouble.

To apply through a registered counsellor for debt counselling, click here.

To apply for debt consolidation click here.


 

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