Page 15 - Blue Valley_Issue 3_2022

LIFESTYLE

HOW TO

MANAGE

YOUR

DEBT

Rising costs are
adding to the
pressure that SA
consumers are Photo by Towfiqu Barbhuiya on Unsplash
facing in trying to
remain debt-free

ising interest rates and an uptick in inflation He says, however, that there is a silver lining “Debt counselling is a long-term commitment,
are squeezing South African consumers to the situation which is that people who are not an easy fix. Just as it takes a while to
Rbetween the proverbial rock and a hard in debt are now starting to look for help more accumulate debt, it also takes time to reduce it.
place, as the cost of servicing debts goes up while readily. The important thing is to keep making regular
the purchasing power of their money declines. payments and, if your circumstances change for
“All our members have indicated that more the better, to pay more to accelerate the process.”
Benay Sager, chairperson of the National Debt people are pro-actively seeking help before
Counsellors’ Association, says consumers’ things get too dire. Some of this is certainly While under debt counselling, consumers
disposable income has decreased by a quarter due to a diminished ability to borrow, but cannot be granted additional credit. This is a
since 2016 when the cumulative effect of our members also work tirelessly to highlight worthy trade-off as the consumer is expected
inflation over the six years is considered. Data the significant benefits that come with debt to demonstrate they can manage their existing
from the National Debt Counsellors’ Association counselling, particularly in a higher interest rate debt in the first place.
members shows that consumers are borrowing environment.”
to make up the shortfall. For consumers who are in debt counselling,
Under debt counselling, interest rates on it is critical to inform their debt counsellor if
“Increasing inflation will exacerbate the pressures unsecured debt can be reduced from an average their financial situation changes - for better
consumers are under, as the cost of debt is rising of 20%+ to 1 - 2%. This allows consumers to pay or for worse. Once a consumer pays off their
and take-home pay does not stretch as much as it back their expensive, high-interest debt. unsecured debt (and is up to date with any
used to. For consumers who have expensive debt bond repayments, if applicable), a clearance
(with high interest rates), debt counselling is a There are other significant benefits to debt certificate is issued, with the approval of the
good option to explore,” says Sager. counselling. These include: National Credit Regulator, and the consumer
• Consumers’ assets, such as homes and can again become credit active.
Official figures for the CPI stood at 4,48%, vehicles, are legally protected.
near the upper end of South Africa’s target • Consumers pay back towards what they Sager warns, however, that there are
range, from a low of 3,27% in 2020. However, can genuinely afford, to reduce the debt. unscrupulous enterprises that try to take
electricity and fuel are both expected to increase • Rather than having to deal with numerous advantage of impatient consumers undergoing
astronomically, and that will have a ripple effect creditors, they deal with only one person, debt counselling and offer ‘debt review removal
across other goods and services and increase the debt counsellor, who renegotiates all services’. This is in violation of the National
upward inflationary pressure. the debt. Credit Act and consumers who are tempted
• By renegotiating the period over which could lose the protection from creditors that
“Over the past six years, the trend has been that the debt has to be repaid, and the interest debt counselling affords.
loan sizes have increased, while the number of rates, monthly repayments are reduced.
credit agreements have declined. This means “Debt counselling has many advantages,
consumers are borrowing more per agreement Sager cautions that, while there are many but consumers need to understand it is a
and reaching the point that they no longer advantages to debt counselling and in South commitment, not an instant solution. For people
qualify for further credit. In an increasing interest Africa it is effective, well run and highly who stick with the plan and make their monthly
and inflation rate environment, we expect this to regulated, consumers need to understand that payments, it works well, and the vast majority
intensify,” says Sager. it is not an instant solution. never fall back into unsustainable debt again.”

BLUE VALLEY NEWS • Issue 3 2022• 13