Guiding consumers since 2009

Are you in debt denial?

By Danielle van Wyk

With debt levels increasing at 13% more than income levels, South Africans are more debt-stressed now than arguably ever before. This is iterated by the National Credit Regulator’s (NCR) report that nearly half of credit-active consumers in South Africa have damaged credit records.

However, only a few seek the necessary help. Justmoney delves into what it means to be overindebted and what your options are.

Tip: To get the help you need with your debt today, click here.

“South Africans’ net income has declined markedly in real terms since 2015 and consumers are making up the shortfall by large-scale borrowing,” says Debtbusters, a trusted South African debt counselling company.

According to Debtbusters’ latest Debtometer report consumers required 64% of their net income to service their debt every single month. This, added to the flatline trend when it comes to income growth, makes for a very financially strenuous situation.

For this reason, South African consumers are supplementing their income with unsecured lending on a large scale, says Debtbusters.

While debt is not necessarily a bad thing, unsecured debt is.

“Unsecured debt can be classified as short-term debt that’s not supported by any collateral like a house or a vehicle. It’s typically expensive with high interest rates because it’s a higher risk for the lender. Personal loans are a form of short-term debt that’s very popular and helps consumers fill the gap,” adds an in-branch Absa consultant.

What’s more, these short-term loans are being utilised to supplement everyday costs such as food, transport, and school fees to name a few, says Benay Sager, chief operating officer of Debtbusters. Given this, it’s no surprise that increasingly more South African consumers are becoming overindebted.

But what does it mean to be overindebted?

According to financial experts, it means that your debt expenses outweigh your income. While this sounds fairly straightforward there are many people who are in denial.

“Being overindebted often makes one think of someone who is barely able to feed themselves and their family, or is on the verge of having their home or vehicle repossessed. But the truth is there are many people who don’t necessarily fit this mould but are gravely overindebted too,” says the Absa consultant.

Borrowing from one lender to pay another is how many are getting by and while they’re making payments and seemingly keeping their head above water, they will soon reach the end of their rope, adds Sager.

Often this realisation only comes once these consumers find that they’re no longer able to access any further credit. At this stage their credit records have typically been tarnished and they’re in a financial gridlock.

While it’s scary to reach this point, rest assured that there’s trusted help available.

What are your options?

Initiated by the NCR, debt counselling is a debt rehabilitation programme that offers South African consumers a chance at restructuring their debt through a legally approved process and plan.

This process can be outlined by the following 7 steps:

  • Application – This is where you as the consumer recognises you need help, and fills out an application form. Once this is completed you should receive a call from a debt counsellor to explain the way forward to you.
  • Debt assessment – This step is vital as it assesses whether you’re overindebted and where you may have gone wrong.
  • Creating a budget This is where your income and expenses are put into perspective and your debt counsellor draws up a corresponding budget or plan.
  • Negotiation of payments with creditors – Here your debt counsellor will renegotiate a manageable repayment amount on your behalf.
  • Approval of plan – This is a legal process that ensures the plan is binding.
  • Implementation – The plan is put into place and you need to make your first payment.

Debt counselling is a great way to receive instant cash-relief together with the peace of mind that your debt responsibilities are being seen to, says Debtbusters.

“While the industry is still fighting the stigma created by irresponsible and illegitimate debt counsellors that aim to make a quick buck instead of assisting the consumer, there is quite a bit being done on the part of the regulator and those industry players that seek to truly help the consumer,” Sager adds.

“The number of clients completing debt counselling successfully has increased by 60% per annum over the last four years, indicating that for SA consumers under financial strain, debt counselling is an effective mechanism to get financially fit again.”

For more information about the debt counselling process and how it can help you – click here.

Recent Articles

Featured How are you taxed on your retrenchment package?

Unemployment is one of the biggest problems in South Africa. The emergence of the Covid-19 pandemic has exacerbated the situation with a lot of companies retrenching their employees.  When retrenched, you’ll receive a retrenchment package, but do you know how much tax you’re liable for?

Car repossessed – don’t be taken for a ride

When the country is facing an economic downturn, chances are your finances will feel the pinch. This can lead you to make bad financial decisions such as skipping your vehicle payments. But every decision has consequences and if you don’t pay your instalment, the bank will repossess your car. But what can you do when this happens?


Why you should consider gap cover

Your medical aid should protect you from incurring large medical bills when you’re sick. But what if your plan doesn’t cover the full cost of your medical expenses? We got in touch with insurance experts to find out whether gap cover is worth having.

Debt relief - What is your bank offering?

Going through a financial crisis is stressful whether it be as a result of losing your job, being short-paid, having to fork out towards an emergency payment, or finding yourself in the midst of a global pandemic. This is especially taxing if you have a debt to service. It is against this backdrop that banks are increasingly offering payment holidays. Justmoney looks at the various debt relief options available to you from the big five banks.


Premier Hotel and Resorts Special For Senior Citizens

Price: Available on request
When: Daily
Where: Nationwide

The President hotel 10% discount for locals

Price: Available on request
When: Until 31 October 2020
Where: Cape Town

Get 40% off when you book your stay at Colosseum Hotel

Price: Available on request
When: Until 13 December
Where: Cape Town

Latest Guide

Guide to debt rehabilitation solutions