Consumers owe more than R1 trillion

2012-10-19 10:05

The total outstanding amount owed by consumers stands at R1.36 trillion, the National Credit Regulator (NCR) said on Thursday.

“This represents money owed by consumers in the form of mortgages, vehicle finance, credit cards, store cards, personal loans, short term loans, pension- and insurance-backed loans,” the regulator said in a statement.

About 6 400 consumers a month had applied for debt counselling in the past six months.

Over R8.3 billion had been distributed by payment distribution agencies to credit providers since July 2007.

These agencies are responsible for collecting payments from consumers and distributing them to credit providers once debt has been restructured.

Out of 19.6 million credit-active consumers, 53% were in good standing, while 47% had impaired records.

An impaired record is a record in which a consumer account is three or more months in arrears, which has an adverse listing, or which reflects a judgment or administration order.

Financial problems and over-indebtedness could be indicated by borrowing money to pay other loans, skipping payments in order to pay other accounts, or receiving a letter of demand or a summons from a credit provider.

Considering debt administration was another sign.

Consumers who had judgments passed against them, who were absent from work especially towards month end, who were stressed about money matters or who regularly lost money to scams could also be in financial trouble.

“Over-indebtedness is a situation where money available after payment of essential expenses is not enough to pay all other debt,” the NCR said.

This could happen when consumers took on more credit than they could afford.

A change in circumstances, such as retrenchment, could also make servicing debt more difficult.

“When consumers start facing financial difficulties, their first point of contact should be their credit providers,” said NCR spokesman Cornie Tema.

“They need to contact them as soon as possible to try and negotiate their monthly payments.”

Consumers also had the option of applying for debt counselling, as set out in the National Credit Act.

Tema advised consumers to draw up a budget setting out income and expenses, including debt.

“Make sure you match each item on your expenditure list with the creditor you owe, and then compare the total of your monthly expenditure with your total monthly income. Remember your total expenses should not exceed your monthly income,” he said.

Consumers should stick to a budget – which would help them keep track of expenditure – and keep account statements and receipts in a safe place.

Instead of skipping payments, they should negotiate lower instalments.

They should also consider the total cost of credit, not only the monthly instalment.

Tema advised consumers facing financial difficulties to cut down on lifestyle expenses.

“There are a number of expenses you can immediately cut or adjust in order to afford paying off your debts.

“You can cut down or adjust satellite television, alcohol, tobacco, domestic workers, club memberships etc. Comparing prices when shopping is also a step in the right direction.”

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