Debt need not be a life sentence

2011-01-08 11:10

In 2006 Stanley’s wife lost her job and his salary was not enough to pay all their debts. Stanley decided to put himself under administration to protect his assets.

Today we have the National ­Credit Act, and Stanley would have followed a similar route by applying for debt counselling, which prevents creditors from attaching assets like his house as long as he comes to an agreement to repay the loan based on his new affordability.

“I started to manage some of my debts and I saved 10% of my salary. I also rented out a room and put that money aside to renovate the house,” said Stanley, who followed a very disciplined lifestyle, sticking to his budget and repaying the negotiated lower monthly instalments on all his debt.

Each year he used some of his savings to renovate the house and in 2008 he was able to sell it for significantly more than the amount he paid for it.

He used this money to settle his administration order.

“I received the information on how much was still outstanding, I wrote to the administrator and paid the amount into the trust account”.

Stanley had a problem with the administrator who still wanted more money. This attempt to add extra costs or interest is one of the unsavoury practices of administrators or debt collectors.

As this particular administrator was a lawyer Stanley took the ­matter to the Law Society, and the administration order was rescinded, which meant it was cancelled.

For the next two years Stanley saved his money and had enough cash to put a deposit on a new home.

His wife had also found a new job.

He thought it would be a simple matter to apply for a home loan, yet his bank would not assist him as they said he still had a judgment against his name.

Stanley wrote to City Press and his details were forwarded to FNB Housing Finance. This division deals with customers earning R15 000 or less and offers ­home loans of up to R500 000.

FNB Housing Finance looked into Stanley’s credit record.

“He showed us the evidence that he had resolved his judgment; it had just not been cleared by the credit bureau.

“This is a major complaint we ­often receive, but if we are provided with the correct paperwork it is ­relatively easy to sort out,” said Marius Marais, chief executive for Housing Finance.

From FNB’s perspective, Stanley was a stable person who had held the same job for a long time and he worked hard to settle his debts.

He had saved up a 10% deposit which improved his affordability.

Marais said that that when it came to granting loans, the bank looked at both the willingness and ability to pay the loan.

The credit history showed the willingness to pay and the budget was the affordability.

Although Stanley had a judgment five years ago it was for a relatively small amount. He settled it and his banking behaviour had since been good.

“We focus more on current behaviour and frequency to see if this is a serial offender. We recognise that people sometimes run into trouble,” said Marais.

In fact, Marais said, Stanley was considered a low-risk customer ­despite his judgment. He could well afford the loan, he had a deposit and he had demonstrated that he was the sort of person to honour his debts.

Stanley was provided with a home loan below the average lending rate for the division.

By using the protection of administration (debt counselling), which prevented the creditor from attaching his house, and by paying off his debts quickly Stanley put his debt problems behind him.

Lessons learnt:
» Although Stanley settled his administration order early, he did not ask for a discount. According to Paul Slot, head of the Debt Counselling Association of South Africa, ­creditors want to have the debt settled as quickly as possible so you may be able to ­negotiate to pay a lower amount if you are settling the debt ­early.

» It is very important to know your rights and what to do when creditors will not ­remove your negative listings or when lawyers try and extract extra fees.

The credit ombud is a good place to start. Contact the office on 0861 66 2837 or ­ombud@creditombud.org.za.

The website is www.creditombud.org.za

Complaints about debt counsellors need to be referred to the National Credit Regulator 0860 627 627 or complaints@ncr.org.za.

The website is www.ncr.org.za.

» Don’t take no as a final answer. Under the National Credit Act banks are obliged to provide a detailed reason as to why the loan is declined. This allows the customer to rectify the problem.

In Stanley’s case he discovered that his credit record had not been cleared.

Unfortunately home-loan procedures are like a sausage machine, with banks processing loans to the value of R2 billion a month so they don’t bother to investigate further.

In fact, FNB’s main home loan division had turned down Stanley’s application based on the incorrect credit information. It was only because it was referred to FNB Housing ­Finance, which has a more specialised team, that the error was discovered.

Find out why your application was turned down and see if there is further information that you can provide that would change the bank’s rating.

Join the conversation!

24.com encourages commentary submitted via MyNews24. Contributions of 200 words or more will be considered for publication.

We reserve editorial discretion to decide what will be published.
Read our comments policy for guidelines on contributions.

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
0 comments
Comments have been closed for this article.

Inside News24

 
/News

Book flights

Compare, Book, Fly

Traffic Alerts
There are new stories on the homepage. Click here to see them.
 
English
Afrikaans
isiZulu

Hello 

Create Profile

Creating your profile will enable you to submit photos and stories to get published on News24.


Please provide a username for your profile page:

This username must be unique, cannot be edited and will be used in the URL to your profile page across the entire 24.com network.

Settings

Location Settings

News24 allows you to edit the display of certain components based on a location. If you wish to personalise the page based on your preferences, please select a location for each component and click "Submit" in order for the changes to take affect.




Facebook Sign-In

Hi News addict,

Join the News24 Community to be involved in breaking the news.

Log in with Facebook to comment and personalise news, weather and listings.