Are you drowning in debt? Seven warning signs to watch out for
By Hayley Parry
Staying awake at night worrying about your debt? Feel like you’re 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, more than 10 million South Africans have defaulted on debt, paid late or defaulted on debt due to the impact of Covid-19 on our means of sustenance? It’s no surprise that more and more people are asking for help managing their debt, according to the latest DebtBusters Debt Index.
Recognizing that you may have too much debt is the first step in taking control. Amelia de Milander, Marketing Manager at DebtBusters, and Lee Soobrathi, Case Management Manager at the Credit Ombudsman’s Office, have identified seven signs that your debt may be unmanageable:
- Worrying about debt keeps you from sleeping at night.
- You constantly receive text messages and phone calls asking for payment.
- Your budget does not balance; expenses exceed income.
- Your credit score goes down because you missed payments.
- You are refused credit because you are over-indebted.
- You cannot pay a debt, in whole or in part when it falls due.
- You are using a credit facility to pay off other debt.
Steps to take control:
- Revise your budget and reduce non-essential expenses.
- Talk to your creditors and discuss the terms of renegotiation.
- Contact a debt counselor and seek advice.
- If you are counseled and qualify, enter the Debt Review, also known as Debt. advice
WHAT ARE YOUR OPTIONS?
Debt review, or debt counseling, is a legal process if you’re struggling to pay off your debts. A debt counselor will determine what is affordable to pay each month for debts and negotiate lower monthly payments with creditors to pay off debts while paying for living expenses. During a debt review, creditors cannot sue or harass for payment. Always be proactive in managing debt, because if creditors have taken legal action, you may not be eligible for a debt review.
This is when all the debts are combined into one debt. While this makes debt management easier because there is only one loan, debt consolidation doesn’t always mean lower repayments. This will depend on the interest rate applied and whether any creditors agree to lower monthly payments. Always carefully check the details of a loan and do the math so that an informed decision can be made.
ADVICE FROM THE EXPERTS
Check your credit report
“The best place to start for anyone who has credit agreements and is active in credit is to sign up for their free credit report, which gives them insight into their own unique credit profile and how credit bureaus in South Africa assess them, ”says Amelia de Milander of DebtBusters.
You can check your credit report on DebtBusters, Transunion, Experian, or Clear Score.
Don’t ignore your creditors
“The worst reaction is to avoid collection or demand, as this can lead to unwanted consequences such as legal proceedings and seizure of goods, which then comes with an additional burden of legal fees and interest. additional, ”says Lee Soobrathi of the Office of the Credit Ombud.
Take calls from creditors or respond to messages, confirm details of debts including amount owed and interest rate applied. Find out about alternative payment methods.
Hayley Parry is a financial coach and facilitator at 1Life’s Truth About Money.
* The opinions expressed here are not necessarily those of the IOL or the titles sites.