Even if you feel the world is against you when it comes to bad credit, there’s help out there. Moeshfieka Botha of Credit Matters provides financial tips to help you get your record back on track.
Those of us in debt often get to the stage when we just don’t know what to do about our dire financial situation. It’s a burden that weighs heavily on us which we carry around as we go through the motions of everyday life.
How many of us smile and chat with our colleagues at work when all we want to do is burst into tears because there seems to be no way out?
How many of us smile cheerfully as we fork over money to our kids for school events and school projects knowing full well it wasn’t in the budget and is going to cause problems later on?
How many of us simply can’t make ends meet with the income we receive? No matter how we panel-beat that budget it just won’t work for us. How many of us wish there was a fairy with a magic wand that could make all our debt just disappear? Well, I can’t be your fairy but I have made a list of the main debt-relief options available in South Africa. They may or may not work for you but I think at least knowing what your options are can bring a measure of relief from the stress bad finances can cause.
- A consumer is placed under administration by applying to a court and can be removed from administration only by applying to the same court. It’s noted on your credit record until all your debt is paid off.
- The fees are usually exorbitantly high.
- You won’t be able to access more credit.
- This is a very outdated form of debt relief and is available only for consumers whose total unsecured debt is R 50 000 or less.
- This process isn’t adequately regulated by the law or any governing body, and has therefore resulted in far too much misconduct, inefficiency and even theft.
- Sequestration is a high court application under the Insolvency Act. Any person that can prove their debt amounts to more than their assets can apply for sequestration. To qualify, you have to prove there will be value to the creditors to the amount of 20 cents for every rand you owe.
- With voluntary sequestration, it’s listed on your credit record until you apply for a rehabilitation order (usually within three to 10 years).
- You won’t be able to access more credit.
- All your assets will have to be sold.
- A debt counsellor draws up a budget to calculate how much an over-indebted consumer can afford to pay their credit providers, and creates a payment plan for their credit providers in accordance with this.
- Debt payments are reduced by asking credit providers to extend payment terms and reduce interest rates.
- Creditors and debt collectors will eventually stop harassing you as your debt counsellor will deal directly with them.
- You make only one monthly payment to a payment distribution agency (PDA) which is distributed among all your creditors.
- Your debt counsellor will negotiate with your creditors for lower monthly instalments.
- By paying lower monthly instalments you’ll have more money left for everyday necessities such as food, electricity and transport.
- Once a court order has been granted and you continue making the required payments no legal action may be taken against you.
- You won’t have access to further credit until your existing debt has been settled
- Unlike administration, the debt counselling process is set out in the National Credit Act and regulated by the National Credit Regulator.
Many consumers see this as a debt-relief solution. But it isn't really as consumers aren’t paying off any debt, just substituting their current debt with other debt. There can be benefits if the fees, interest charged and repayment term are low, but often consumers end up paying more than they think they will.
You can also make voluntary arrangements with your creditors for lower monthly repayments over a certain period of time. But best of luck to you – just trying to get through to the call centre and the agent who you have to deal with is no easy task. It’s ridiculous that at the very time when you need to make arrangements for lower monthly repayments because you’re cash-strapped and can’t afford to pay more that you also have to be spending money on phone calls or taking time off work when trying to make these arrangements!
It might not always seem like it but there is light at the end of the tunnel. Hopefully one of these debt-relief options suits you and your household, and you are able find a measure of financial and emotional peace.