The South African Reserve Bank (SARB) has published a new report of the country’s financial stability across key economic sectors. Amongst other things, the review looks at how much debt South African households have and how much of our income is going towards paying off our debts every month. One of the key concerns cited in the review is an increase in lending and how households are using more of their disposable income to service debt. It’s called the debt to-disposable-income ratio. In a nutshell, it means more people are earning less, borrowing more from the bank and finding it difficult to service or pay back the debt. According to the new report, on average, households are spending 9.4% of their income on servicing debt – the highest its been since 2016.
Besides getting an increase in your salary, finding an extra job or making new streams if income (like starting your own business) what are the options for those who are struggling with debt and aren’t getting anywhere trying to pay it off?
Debt review is not a means to finance a consumer’s lifestyle, but to assist in repaying the consumer’s debt in full to his/her creditors. What we have seen at Debtcare in the past is that many creditors often only enrich themselves by charging additional interest on extended terms of repayment, which doesn’t actually bring much relief to the person in debt.
How does Debt Review work?
Debt review is a process that should be addressed by registered Debt Counsellor. The Debt Counsellor must apply his mind to find the correct solution for each individual because each person has a different income, different expenses and debt that needs to be repaid. Think of a Debt Counsellor and your personal debt consultant. Just like a personal banker, they work with you to find the best solution for your financial situation, but they specialise in debt. During Debt Review your Debt Counsellor assesses your current financial situation by looking at your income, expenses and debt. Based on his/her findings they then recommend 1 of 3 scenarios or options.
Debt Review – Scenario 1
During the assessment, the Debt Counsellor may find that you are actually able to afford your debt and you are not over-indebted at all. At DebtCare we have found that in cases like these where people think they are in debt, but actually earn enough to repay their debt easily, often all that is required is just a reorganisation of budget. A good Debt Counsellor can help you with that.
Debt Review – Scenario 2
During the assessment, the Debt Counsellor may find that you are not over-indebted yet but could potentially be in future. Here a Debt Counsellor can give advice on approaching creditors and negotiating possible easing of agreements, or if the Debt Counsellor has a mandate specifically permitting the interaction and negotiation with creditors he or she can make arrangements on your behalf. Usually, it is only necessary to approach or a couple of your creditors and the payment agreement will only be for the short term. For example: you have debt with Edgars and Dion. Your Debt Counsellor (or you yourself) can reach out to Dion and negotiate a new repayment plan for a short amount of time. All parties will be required to sign a document, so having a Debt Counsellor to facilitate the process is advisable.
Scenario 3 – Scenario 3
During the assessment, the Debt Counsellor may find that you are over-indebted. What your Debt Counsellor looks at is your total amount of debt and will commence with a rearrangement plan. This plan looks at how each credit agreement’s instalments can be reduced and the payment term extended. Remember, creditors are not required by law to offer lower repayment rates, lower interest or extended repayment periods. Your Debt Counsellor will be the one to negotiate this with them. Once complete, you will pay one single amount to cover all your debt obligations every month. This amount is the cash you have available after statutory deductions and essential living expenses have been paid. So you get to take care of your household without the fear of creditors grabbing cash from your account.
Where do I start with Debt Review?
The Debt Review process starts with the completion of an online form which captures your details and financial info for a Debt Counsellor to start reviewing. You can complete the online form here.
Alternatively, if you would like to discuss your situation first, you can:
- Call: 0861 977 873
- Email: firstname.lastname@example.org
- WhatsApp: 082 800 8423