6 500 con­sumers ap­ply for debt coun­selling monthly

Finweek English Edition - - INSIDE - BY JUSTINE OLIVIER ed­i­to­rial@finweek.co.za

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.

SOURCE: Stan­dard Bank

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