Drowning in Debt! How to get out!

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According to Experian South African Consumer Default Index report, South African consumer debt has grown to R1.9 trillion, with R20.4 billion in value defaulted for the first time over the period January to March 2021.

With the pandemic playing a major role in the increased debt bubble and default rate,  here are a few things you can pro-actively do to manage your debt problems, should find yourself unable to meet your monthly payments:

  • Budgeting

The simple and most overlooked option is to trim your budget aggressively and sticking to it. If it’s not on the budget do not buy it.

  •  Making arrangements with your credit providers

No one knows your financial situation better than you.  If you are aware that you are heading into financial difficulty, be pro-active and contact your credit providers to restructure your credit agreement in order to ultimately reduce your monthly installment.

The following possible debt solutions will need you to consult with a registered debt counsellor to find the one that will work for you,  because they will have a serious impact on your consumer commercial capabilities:

  • Debt Administration

Debt Administration is a legal process that will reduce your instalments and extend the repayment terms of your debt, as long as your total liability does not exceed R80 000. The legal process is conducted by a lawyer and there are fees involved.

Before opting for this solution,  make sure it is fully explained to you by a registered debt counsellor.

  • Debt review

Debt Review is also a legal process that will extend your debt repayments and reduce current interest rates, provided you cannot repay all your creditors on your current income.

  • Sequestration

This is probably the last resort option you would probably want to go for but, if you proceed with this option, someone will be appoint to manage your finances and, unlike the previous two options,  you will be forced to sell your possessions to settle (or decrease) your debt. This includes your house, car, furniture and other assets of value.

As it is also a legal process you will need a lawyer and there will be fees involved.

There are a lot companies that will assist you with debt solutions. However,  be very careful who you approach.  Before taking drastic measures that you may live to regret, begin by exercising a lot of the good old self- control: stopping impulse-buying and sticking to a strict budget may be the best of all options after all.



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