Dealing with over indebtedness

2015-06-11 06:00

IN our current state of economy it is common to have debt in order to make monthly ends meet. Taking out a loan does not necessarily mean that you are over indebted.

Having debt can be described by paying monthly instalments towards your creditors on a regular basis. Many individuals find themselves in financial strain situations due to current economical factors faced in South Africa.

Over indebtedness is when you have creditors but you can no longer make payments on a regular basis, which means that you will find yourself in default of those credit agreements. Being over indebted results from various factors including applying for loans which would render you over-indebted or living a lifestyle that is above your means or even by unexpected incidents. In our current day and time anything can happen, from being in a serious accident to losing employment.

These situations can incur serious debt; it can result in skipping payments to some creditors and only paying a few in order to keep head above water each month. In some cases people obtain goods because they think they need it to survive. This might be so but if you find yourself over-indebted then you need to make some changes to scale down in order to improve to your financial circumstances.

Over-indebtedness should be dealt with as soon as possible. Do not leave the situation to deteriorate before seeking financial assistance.


Debt consolidation loan is an actual loan which the consumer needs to apply and qualify for. It is a short term solution which requires strict financial discipline. It can also be seen as taking out one larger secured loan to pay back many others. Without financial discipline, debt consolidation may worsen their financial situation. The loan bears interest between 20 – 31% over 60 months. Not only are consolidation loans much more expensive than debt review it also bears great risk for the consumer. Often it is not an option or people find that they cannot pay the debt consolidation loan either.

Debt Counselling

Administration can be described as a negotiation where the credit providers only receive distributions every three months. Administration is applicable to judgments, non credit agreements and credit agreements to a maximum of R50,000. Distributions are done by an administrator and paid by cheque which leads to additional expenses for the consumer. Without reducing the interest rates, not reviewing the consumers file and all the hidden costs involved the consumer can be under administration for many years paired with a consistent increase in their outstanding balance.

Secured loans are larger loans and have lower interest rates e.g. a home loan or a car loan. To take out a secured loan you need some asset to serve as security. The interest rate is lower because the creditor has the asset as insurance and in the event that the debtor cannot pay off their loan, the creditor can apply for a legal foreclosure and the asset will then belong to creditor through repossession.

Unsecured loans are smaller loans and have higher interest rates because the creditor has no security if the debtor is unable to repay the loan. Most companies who give unsecured loans do a financial background check to see if the debtor can afford to pay their monthly instalments. These loans can be in the form of a credit card, an overdraft or credit agreements with private companies e.g. a store card. Credit providers hire debt collection agencies to motivate consumers who fail to make payments on these loans. Debt collectors put a lot of pressure on people. This is a sign to consult with a debt counsellor. -Supplied

About BB Consumer Care

BB Consumer Care is one of the leading Administration and Debt Counsellors in Pietermaritzburg and KZN.

They have been in the industry for the past 15 years and have successfully helped thousands of clients to free themselves of financial stress and debt.

How can debt councelling help you

More Cash Available for day to day expenses.

Reduce your instalments.

Learn to budget wisely

Protect your house and car by timeously paying your reduced instalments

Once you have settled all your debt, the debt counsellor will issue a clearance certificate and send it to the Credit Bureaus, clearing your credit record.

Your debt counsellor will get you on the path to Financial Freedom and help you take control of your hard earned money.


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