More and more South Africans are using debt counselling to resolve their financial worries. Here's how it affects your day-to-day money matters.
TransUnion's Q2 2021 Consumer Pulse Report shows that nearly nine out of 10 South African consumers remain concerned about their ability to pay their bills and loans. "While there have been clear signs of recovery in South Africa's economy and the overall state of consumer finances, the fact is that many consumers are still under severe financial pressure," says TransUnion South Africa's Head of Financial Services, Andries Zietsman. "It also remains to be seen what effects the third-wave lockdowns and recent civil unrest will have on the consumer wallet."
The decision to undergo debt review (also known as debt counselling) should not be made lightly, but it can also help you turn your finances around. In a recent statement Joseph Phiri, certified financial planner at Alexander Forbes, said that in mid-2021 South African households were spending 75% of their take-home pay on debt. "That means they only have a quarter of their salary to spend on everything else," he said. "This worsens if the interest rates increase and the cost of paying the debt rises."
If your debt is getting out of control, you need to take action. Here's how debt review works, and how it could help.
It is a legal debt-relief process. If you are over indebted and battling to meet your debt obligations, you can apply to undergo debt review. A qualified debt counsellor will help you assess your financial situation and draw up an affordable repayment plan that allows you to also meet your living costs.
You may be able to draw up your own repayment plan, but if you have been struggling to meet debt obligations and financial commitments, debt review may be the answer. You can use a debt review calculator to determine what your new monthly repayment would work out to before making a final decision.
No. Once you agree to undergo debt review, the National Credit Regulator notifies all credit bureaux that you are under debt review. You will not be allowed or able to take on any new debt until all your debt (with the exception of your bond or home loan) is paid off. That means you cannot take out car finance, a personal loan or a store account, nor can you extend the credit available on your credit card or overdraft.
You can remain employed or take on a new job while under debt review. However, you should disclose this to a potential employer upfront. Most employers will conduct a credit check as part of the job application, particularly so if you are going to be employed in the financial services industry.
Yes. Your prospective landlord or letting agent may well do a credit check on you prior to issuing a lease, but your debt counsellor can provide them with a proof of budget and allowance for the rent amount. Most agents will accept that.
If your cellphone contract was already included in your debt review, then yes, you can. You just need to ensure that the monthly amount due once you have taken the upgrade does not exceed the monthly amount allocated to your cellphone contract in your budget.
If you are able to maintain your debt payments, you can apply for and accept a job in another country. You would have to keep your debt counsellor informed of any major life changes, such as moving to another country, and ensure that you stay on top of your debt repayments.
Unfortunately, insurers may decline your application or charge you a higher premium if you are under debt review. You can get readily available insurance quotes using our insurance quote comparison tool.
Once you have settled all your debt (with the exception of your bond or home loan), your debt counsellor will issue you with a clearance certificate, which means you will be able to re-enter the credit market or take on new debt.
All clear? Good! Use our free online tool to apply for debt counselling.
This article is for informational purposes only and should not be construed as financial, legal or medical advice.