Get real about debt

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Cape Town - Consumers who are drowning in debt and do nothing to better the situation only have themselves to blame when their assets are repossessed, said Roger Brown, CEO of national debt counselling firm Credit Matters.

Brown said consumers have to become more proactive about finding debt solutions instead of living in denial. “When people come for a debt counselling consultation, we draw a credit report to assess their debt situation.

"For many, this is then the first time in their lives that they see their credit report. This is unacceptable, since every South African is entitled to a free credit report once a year. People have no excuse for not knowing exactly what their financial situation is.”

Problems of reckless lending and prescribed debt often only get picked up when consumers visit a debt counsellor and a full financial assessment is done.

With nearly 10 million consumers with impaired credit records, overwhelming debt is an issue faced by many South Africans. Currently nearly 80% of households' disposable income is going towards debt.

Expenditure exceeds income in many families and very few South Africans are saving. In the South African Reserve Bank's financial report for the year ended March 31, it said unsecured lending by the six banks increased from R321.36bn in December 2011, to R441.27bn in December 2012.

Yet many people choose to live in denial about their debt.

Consumers allow their already battered financial situations to deteriorate further by not acknowledging their debt crises. Even with debt collectors hounding them on a daily basis, it seems that many simply wish the problem away.

“There is no fairy dust which will make your debt disappear. South Africans have to change their apathetic attitude towards their debt and get help,” said Brown.

Get yourself into gear to tackle your debts

Brown has a checklist for those struggling with debt:

*   Get a copy of your credit report from the different credit bureaus (TransUnion, Experian and Compuscan);
*    Familiarise yourself with exactly who your creditors are;
*    Get the exact instalment, term and outstanding balance of your debt with each creditor;
*    Once you have this, plug it into your budget. Be honest with yourself and draw up a realistic budget;
*    If most of your income is going towards paying your debt or your expenditure exceeds your income, accept that you are over-indebted;
*   Now start looking at options to address the situation;
*   Approach your creditors yourself, or enlist the help of a registered debt counsellor to negotiate with your creditors for      lower repayments. Once there is a court order in place, debt counselling provides protection from repossession of your goods.
*    Make the necessary changes to your lifestyle to accommodate what you can afford and not what you want.

South Africa is facing a consumer debt meltdown. It is up to each individual to become proactive about finding their personalised debt solution.

Debt counselling may not be the solution for everyone, but Brown advises consumers to at least start looking at their options – before it's too late.

 - Fin24

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