6 500 consumers apply for debt counselling monthly
Understanding and managing your debt is an important aspect to being able to get on the path of financial freedom,” says Theunis Kruger, head of unsecured lending at Standard Bank.
Unfortunately, the reality is that the majority of South Africans are living way beyond their means. Often loans are taken out to pay for outstanding debt and credit cards are used to pay for luxury items. Statistics from the National Credit Regulator (NCR) show that, on average, 6 500 consumers apply for debt counselling monthly.
Further stats, derived from a report for the June 2014 quarter by the Credit Bureau Monitor, indicated that the number of impaired accounts increased to 21.28m, an increase of 2m quarteron-quarter and 2.41m year-on-year. The number of accounts increased from 77.18m in the previous quarter to 79.42m.
The number of consumers with impaired records increased by 343 000 to 9.95m. Of these, 28.3% were three or more months in arrears, 5.2% had adverse listings and 11.4% had been issued with judgments and administration orders.
With such a large number of creditactive consumers with impaired records, is there anything that they can do to help rectify their situation? Once in a spiral of debt it is very hard to get out without seeking outside help. One of the worst things that an over-indebted consumer can do is pay debt with debt.
Says Anton Thomas, head of debt counselling operations at Nedbank: “Do not put your head in the sand and hope the problem goes away. Getting out of debt requires great financial discipline, and the starting point is a commitment to resolving or improving your situation.”
So, what can you do to get out of the spiral and not just become another stat? Says Kruger: “If you are feeling
over whelmed and find it difficult to manage your debt, it is worth remembering that all organisations that offer credit, whether in the form of a clothing account, vehicle f inance or a loan, would rather find a solution to help consumers. Credit providers would rather consider extending the credit period so that customers can manage payments rather than default and never pay.”
Further, debt consolidation may be another viable solution, particularly if you are f inding it difficult to pay the minimum instalment amounts. Says FNB credit card CEO Chris Labuschagne: “Consolidating your debt allows you to merge retail store debt, short-term loans, personal loans and other credit card debt into one account which is then paid off as a single instalment. This provides alleviation with a lower interest rate for the first few months in order to make the repayments a bit lighter on the pocket.”
Keep in mind though, that this form of debt management may only work for some. Unless you are f inancially disciplined your bad habits are not going to disappear overnight by simply ‘moving’ your debt in what is essentially regarded as a ‘short-term f ix’. It may mask the appearance of your situation making your financial situation worse – especially if you do not change your behaviour, you’ll only find yourself worse off.
When asked if there were any tips available for those who can’t afford to pay the minimum amount on their debt, Kruger says: “Before you start to fall behind on payments, and to help you save your credit profile and ratings, it would be a good idea to cut back on non-essential spending, relook your creditors list and set up meetings with relevant creditors, explain your situation and push to adjust your repayment options to lower your monthly premiums for a period of time.”
Debt review may be another option if you f ind yourself spiralling further down the hole. Second Chance Debt Review advises: “If your expenses are more than your income; if you have a lot of different credit cards and loans which you are struggling to pay; if you regularly skip monthly repayments of loans or credit cards and the credit provider starts phoning you regularly, you should apply for debt review.”
Unfortunately, unless you seek help from a professional, getting out of debt will continue to be a huge obstacle. Fear not, however. You can climb out of the spiral – seek professional help, become disciplined with your financial behaviour and you will be one step closer to becoming debt free.