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Are you drowning in debt? Seven warning signs to watch out for

By Opinion Time of article published Oct 20, 2021

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By Hayley Parry

Lying awake at night worrying about your debt? Feeling like you are out of control when it comes to your finances? Here are seven warning signs to look out for and tips to help you manage your debt.

Did you know that in 2020, over 10 million South Africans either missed a debt payment, paid late, or defaulted on a debt due to the impact Covid-19 had on our livelihoods? It comes as no surprise that more people are seeking help to manage their debts, according to DebtBusters’ latest Debt Index.

Recognising you may have too much debt is the first step to taking control of it. Amelia de Milander, DebtBusters’ Marketing Manager, and Lee Soobrathi, Head of Case Management at the Office of the Credit Ombud, have identified seven signs your debt may be unmanageable:

  • Worrying about debt keeps you awake at night.
  • You constantly receive SMSs and phone calls requesting payment.
  • Your budget doesn’t balance; expenses exceed income.
  • Your credit score falls because you missed payments.
  • You are denied credit because you are over-indebted.
  • You cannot pay a debt, in full or partially when it is due.
  • You use one credit facility to pay another debt.

Steps to gain control:

  • Review your budget and cut non-essential expenses.
  • Speak to your creditors and talk about renegotiating terms.
  • Contact a debt counsellor and ask for advice.
  • If advised and you qualify, enter debt review, also known as debt. counselling

WHAT ARE YOUR OPTIONS?

Debt review

Debt review, or debt counselling, is a legal process if you struggle to pay your debts. A debt counsellor will determine what is affordable to pay each month towards debts and negotiate lower monthly payments with creditors to pay off debts and still pay for living expenses. When in debt review, creditors cannot take legal action or harass for payment. Always be proactive in managing debt because if creditors have taken legal action, you may not qualify for debt review.

Debt consolidation

This is when all debts are consolidated into one debt. Although this makes managing debt easier because there is just one loan, debt consolidation doesn’t always been lower repayments. That will depend on the interest rate charged and whether any creditors agree to lower monthly payments. Always check the details of a loan thoroughly and do the calculations so an informed decision can be made.

TIPS FROM THE EXPERTS

Do check your credit record

“The best starting point for anyone who has credit agreements and is credit active is to register for their free credit report, which gives them insight into their own, unique credit profile and how the credit bureaus in South Africa score them,” says Amelia de Milander of DebtBusters.

You can check your credit record at DebtBusters, Transunion, Experian, or Clear Score.

Don’t ignore your creditors

“The worst reaction is to avoid the collection or request as this can lead to undesirable consequences like legal processes and attachment of goods, which then comes with the added burden of legal costs and further interest,” says Lee Soobrathi, of the Office of the Credit Ombud.

Take creditor’s calls or respond to messages, confirm the details of debts, including how much is owed and the interest rate charged. Enquire about alternative payment arrangements.

Hayley Parry is a money coach and facilitator at 1Life’s Truth About Money.

*The views expressed here are not necessarily those of IOL or of title sites.

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