Be warned of the debt trap

By Staff Writer

According to data from Statistics South Africa, employment contracted by 1.3% or 171 000 jobs between the fourth quarter of 2009 and the first quarter of 2010. The year on year picture, shows that 833 000 jobs have been lost over the past year.

According to the National Credit Regulator's statistics, there are over 18 million credit active consumers, of these, 45% have impaired records. A consumer is classified as having an impaired record if he/she has three or more payments in arrears, or has an "adverse listing", or a record that reflects a judgment or an administration order.

To date in excess of 170 000 consumers have applied for debt counselling. The scenario therefore is set for employees to exercise extra caution about how they handle their finances.

It is definitely time to settle old debts, drastically reduce new ones, and control budgets with a firm hand.

"Both employees and their employers should be concentrating on a combined effort of promoting wise financial management," stresses Peter Setou, Senior Manager: Education and Strategy at the National Credit Regulator (NCR).

"The NCR is continually educating and informing consumers/employees on the role of the National Credit Regulator, objectives of the National Credit Act, consumer rights under the NCA, debt counselling, credit bureaux, budgeting, dealing with over-indebtedness etc. However, our success will be limited if there is no active support and participation from both employers and their staff."

Setou strongly advises employers to include educational programmes on managing finances and dealing with over-indebtedness into their organisations' wellness programmes.

Employees are also urged to make use of these services offered by employers.

"It is common knowledge that stress-related illnesses have a markedly negative impact on productivity, therefore employers should assume the responsibility of advising their employees on where they can obtain assistance. When, for example, employers note a rising incidence of garnishee orders within the organisation, they should take proactive steps to point employees in the right direction for advice and counselling."

Employees who already find themselves in a position where money available after payment of essential expenses is not enough to pay all other debts must act immediately because the chances are that they may be over-indebted. The first step is to approach their credit providers and negotiate lower instalments. In most cases credit providers are willing to assist. If this fails they need to contact a registered debt counsellor.

Recent Articles

Featured Do you still need credit life cover when you have life cover?

When you take out credit, your creditors will require you to pay back what you owe no matter what your circumstances are. This is why they have credit life cover built into their loans to ensure you are still able to pay off your debt, should any unfortunate event occur. 

 

Read more

Are you ready to just tap and go when you pay?

The integration of the tap and go system has revolutionised the way consumers make payments. Instead of having to insert or swipe your card, you are now able to simply tap and have the payment registered almost instantaneously. But how safe is this?

Read more

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

Sign Up

To our weekly newsletter for advice you can bank on

Deals

Save with 10X investments

Price: Free
When: Until 30 June
Where: Online

Sanlam Cumulus Investment Plan Limited Offer

Price: From R2,500
When: Limited Period
Where: Nationwide

Roman's Pizza Special - Any Single Large Pizza

Price: R69.90
When: Until 31 July
Where: Nationwide