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Media Info
 Now’s the time to tighten purse strings
25 June 2009
It’s not the time to go on a wild spending spree or buy anything that is not absolutely necessary, especially with the debt demon knocking even louder on our door. That’s the view of André Snyman of Consumer Assist, one
of the largest debt counselling organisations in the country..
“Data from the South African Reserve Bank shows that debt summonses soared 14,4% in February – personal bankruptcies rose after hitting 40,4% in January.
Wholesale trade dipped 8,9%, retail sales plunged 4,5% – a record drop,” said Mr Snyman. Surprisingly, it’s people who earn R700 000 a year and more who are the most debt stressed, a study by the University of Pretoria showed.
One case Mr Snyman handled centred on a professional Cape Town couple, he an attorney and she an accountant, who used the bond of their R3.5 million house as an ATM, withdrawing money to spend on holidays and luxuries.
But then their respective practices slowed down, to put it mildly, and faced with a mountain of debt they have put their house on the market.
“They haven’t had a single offer higher than R2.3 million, so not only are they in debt, but even if they sell their home, they will still owe the bank another R2.1 million they don’t have,” Mr Snyman said.
“They also can’t opt for deb consolidation because banks are not happy about assisting people to extend their debt.
“Debt consolidation was popular, but then people who applied for it would use the debt relief it provided for another spending spree so the banks are closing the taps,” Mr Snyman said.
The major options now are:
debt counselling, which restructures instalments to allow the consumer to pay his or her debt and meet his or her basic living expenses and debts are paid monthly; or monthly administration, which is a legal process, in
which the instalments are reduced.
Creditors receive payment every three months, but the term of repayment is much longer than under debt counselling.
Debt must be less than R50 000 to qualify. Liquidation is when assets are sold to try to lessen the debt and the court appoints someone to manage your finances.
This is expensive and you will be blacklisted for 30 years or until the court declares you rehabilitated.
The first step is to get a free report about your credit rating from Experian (0861 10 665) or Trans Union (0861 482 482). Immediately inform them of any errors or complain to the National Credit Regulator on www.ncr.org.za and follow the links.
Another client owed R3 004 985, including his bond. “He was paying off R24 400 a month but the interest over the 240 months of the debt was going to amount to R2 783 466 alone. In other words, over 20 years, he would pay out R5 788 451.
“The debt counsellor restructured his debt after negotiations with creditors.
“His monthly payment dropped to R16 890 a month, which means total interest on debt will come down to R1 544 233 and the debt will be reduced to R2 862 133 – including the debt counselling fees.
Debt counselling means he will remove 92 months off his repayments, eliminate R142 852 debt, reduce monthly payments by R7 600 and the biggest saving will come in the R1 239 243 cut from interest rates.
After this process he will have a clean credit record.” Mr Snyman said debt counselling in terms of the National Credit Act had helped hundreds of consumers to keep their homes and not lose their cars.
“But debt teaches us important lessons. The most important one is that if you don’t respect money it can inflict serious punishment.”
However, overspending is not always the problem. Sometimes retrenchment or illness in the family can turn a good credit record bad.
Mr Snyman said on average it takes three years to completely eradicate debt but once this process is complete, the consumer has a clean credit record and has learned the financial management tools to better manage money.
Here are some steps you can take if you are in serious debt and need help.
Visit www.consumerassist.co.za to see if you are severely indebted on the debt calculator, apply online for debt counselling or call 0861 21 22 23.
Take all your financial records, including contracts, pay slips and bills to the debt counsellor, pay a R50 consulting fee and the debt counsellor will advise you how to continue to pay off debt while the counsellor negotiates with your creditors (it takes 40 to 45 days), either pay your creditors direct or the counsellor will give you details of a trust account for a Payment Distribution Agency (PDA) which will pay creditors on your behalf.
No creditor is allowed to take action against you for 60 days after applying for debt counselling, unless a court action has already been instituted against you, but Consumer Assist will negotiate on your behalf.
FOR FURTHER INFORMATION www.consumerassist.co.za 0861 21 22 23 debt counselling call centre
Andre Snyman - CEO - Consumer Assist
aurelia.espag@consumerassist.co.za / 011 654 6018 (Languages: English, Afrikaans)
Source: Sapa
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