YOUR MONEY Why avoiding debt collectors is a bad idea
Many people are scared to tell the companies they owe that they cannot afford to pay
HOW often do you avoid calls from unknown numbers? It could be that you do not have issues with debt collectors if you rarely do. Many people generally shun calls from private numbers – or those that start with 087 – simply because they have defaulted on the payment of an account or two.
FINANCIAL CONSTRAINTS ARE TO BLAME
According to Neil Roets, CEO of Debt Rescue, there are about 23 million credit active consumers, of which more than half are in arrears on one or more of their credit arrangements. But avoiding debt collectors only makes the problem worse and puts you in trouble, debt counsellors warn. Over-indebted consumers can negotiate with their creditors to have their monthly payments adjusted to suit their pockets.
“Although it is possible for a consumer to negotiate on his own behalf with creditors, creditors are not under a legal obligation to come to an arrangement. And due to the fact that a consumer would negotiate with each creditor individually, it is an immensely difficult task to reach consensus with each, as each creditor would only be able to know the impact of their own accounts with a client,” says Neil.
He adds that, “In the case of an over-indebted consumer under debt counselling, creditors have to engage with the debt counsellor by law and all credit agreements are included, which leads to a fair and transparent process. During the debt counselling process, a consumer obtains legal protection and the consumer’s debt is restructured to enable them to pay a lower amount monthly over a longer period of time.” NEGOTIATE FOR LOWER PAYMENTS Zak King of Debt Counselling South Africa says if consumers manage to negotiate lower payments with their creditors, they should ensure that they have written proof of the agreements. “Phone agreements are very hard to prove if things ever turn nasty,” he says.
He warns over-indebted consumers against creating more debt while battling to pay the existing ones off. “It's sad that most people still think the best way to deal with debt is to try to take on more debt. They try to get another loan to pay for their existing loan instead of trying to reduce what they owe and get debt free,” says Zak.
Neil says a number of factors come into play when a consumer becomes unemployed.
“Firstly, the likelihood and speed at which he would be able to obtain new employment,” says Neil. “In the event of retrenchment, a consumer can investigate the possibility of existing retrenchment insurance he might have on the credit agreements by contacting the credit providers.”
If re-employment is not immediate, it is important to keep credit providers updated about your situation.
Zak says,“People can explore the option of debt counselling. They can also investigate if they can claim on their (credit life) insurance with each credit provider. This should cover several months’ instalments while they look for work. Most consumers don’t even remember they have built-in insurance for this situation and the creditors are quiet about it.”