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Are you struggling to repay the money you owe for goods and services you bought on credit over the past few years? If so, take heart in the fact that you are not alone and that you have options such as debt counselling to help you address this challenge.
Millions of South Africans just like you are battling to repay their debts each month, says Nobantu Motsweni, debt counsellor at Legal & Tax - South Africa’s leader in affordable legal cover and tax services. Reckless lending, increasing interest rates, and a tough economy that has caused many people to lose their jobs are all reasons that consumers are battling to service their debts, she adds.
According to the National Credit Regulator, 46% of 18.6 million credit active consumers have impaired credit records. This means nearly half of South Africans with access to credit:
- Have payments are in arrears by three or more months;
- Are slow payers;
- Or have had a debt judgment or an administration order granted against them.
If you are caught in a debt trap, debt counselling might be the right way for you to escape and make a fresh start with your finances, says Motsweni. Debt counselling is a legal process that involves having your debt restructured so that you can pay household expenses and still be able to pay off debt at a reduced instalment at the end of the month.
Debt counselling isn’t an easy process because:
It will take longer for you to settle the amount you owe and you will pay more interest.
- There is a fee attached to it.
- Under debt counselling, you cannot apply for more credit or use your existing credit facilities.
“That means debt counselling is an option you should really only consider after you have exhausted other options,” says Motsweni. “Before you enter debt counselling, you could ask the people who loaned you money to change your repayment terms to ones that you are better able to match each month.”
Debt counselling has already helped many over-indebted consumers to turn their lives around. According to the National Debt Mediation Association (NDMA), over 70% of debt mediation cases resulted in a positive outcome for consumers in the first quarter of this year.
You can enter the debt counselling process by approaching a counsellor who is registered with the National Credit Regulator (NCR). If you are unsure who to use, contact the NCR for recommendations of debt counsellors in your area.
The debt counsellor will take care of your debt restructuring process for you, which will culminate in seeking a consent order for new payment agreements in court. The consent order ensures that your creditors stick to the new repayment arrangement and may not take legal action against you, says Motsweni. The order also means that you won’t be blacklisted by the credit bureaus and that your goods will not be repossessed.
Your creditors might not consent to the proposals made on your behalf by the counsellor. In that case, an application will have to be made to a court to force your creditors to accept less than what they want in line with your financial circumstances.
If some of your creditors have taken legal action for late or non-payment of your accounts, those debts cannot be included under the debt counselling processes. For that reason, you should apply for debt counselling before debtors take legal action against you, Motsweni advises.
“Don’t delay if you are a candidate for debt counselling,” she says. “Act now so that you can begin to take control of your life and finances. It is a move that can improve your life immediately.”
