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

Move! - - CONTENTS - By Mandla Khu­malo

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.

BE­ING UN­EM­PLOYED

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.”

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