Many South Africans make use of credit facilities like clothing accounts, short-term loans and credit cards. These are all potentially useful ways of making ends meet, especially when times are tough.
In some cases, however, easy access to credit combined with financial need and poor budgeting can lead to seemingly insurmountable debt.
If you’re struggling to pay off your existing debt, ignoring letters of demand and cringing each time the phone rings, it’s time to take control of the situation.
Consolidate your debts
In some cases, it may make sense to consolidate your debts, securing a single form of credit and using this funding to pay off other, smaller debts that have become prohibitively expensive.
The goal of consolidating multiple smaller loans into one bigger loan is typically to secure a lower overall interest rate, with a longer repayment period. The most common way of doing this in South Africa is to borrow against your home loan.
Of course, this won’t make your debt simply go away – but it may provide some breathing space.
Bite the bullet
Some ways of raising money quickly (and legally) so you can pay off urgent debts are to:
- sell valuable assets, such as a vehicle
- rent out a room or, if you’ve got friends or family you could stay with for a while, even your entire home
- if possible, get a second job (for example one you can complete after hours or on weekends).
You may also be able to get yourself out of debt by drastically reducing your monthly expenses, even if this means temporarily cancelling options like insurance, phone contracts and gym memberships.
Consider debt counselling
Debt counselling was introduced by the South African government as an alternative to administration and sequestration (another term for bankruptcy). It’s designed to help over-indebted consumers manage and settle their debt.
How debt counselling works
To start the process of debt counselling, you apply to a debt counselling agency.
A trained debt counsellor will conduct a review of your debt and, if you’re found to be “over-indebted”, will arrange for you to pay reduced interest rates and lower monthly instalments to your creditors.
Once you’ve applied for debt counselling, your creditors will no longer be able to contact you directly. Instead they’ll have to liaise with your debt counsellor.
The debt counsellor will obtain a court order confirming your new repayment plan. This will protect you from legal action, provided you pay your creditors according to the plan.
If creditors have already taken legal action against you when you apply for debt counselling, the relevant debt may be excluded from your debt review. This is why it’s important to seek debt counselling sooner rather than later.
Cost of debt counselling
Debt counselling is not free, but the only fee you’ll be required to pay upfront is an application fee of R50. If you qualify for counselling, all other fees will be included in your restructured repayment plan. For further information on the debt counselling process, visit the National Debt Mediation Agency website.
Where you can find a credible debt counsellor
To find an accredited debt counselling agency, visit the Debt Counsellors Association of South Africa website. Alternatively, call the National Credit Regulator on 0860 627 627 or visit www.ncr.org.za for a list of NCR-compliant debt counselling agencies.
Need a short-term loan to get you through?
With Lamna, you can use a personal asset of value, from jewellery to a paid-up vehicle, to secure a short-term loan – even if existing debt means you won’t qualify for a traditional bank loan. The asset you provide serves as security, and the process is quick, convenient and confidential.
Client borrows R10,000 for 90 days.
Total Cost of Loan
Fixed rates range from 36% to 60% APR and payment options range from minimum 3 to maximum 24 months. Apart from the initiation and monthly fees shown below, the only additional fee is credit life insurance if the borrower does not have this already.