Jobs are scarce and salaries aren’t keeping up with inflation, so something’s got to give. As the cost of living is increasing, South Africans have less disposable income and they are more inclined to look to personal loans or quick loans to make it through a normal month.
“I am in such a financial mess…”. Does this statement sound familiar?
Indebtedness can refer to you or someone that owes money (to say, creditors) and it is a concept widely recognised or perhaps in many cases – ‘best avoided’. According to the latest available figures from the National Credit Regulator (NCR), credit bureaus held records of 25.85 million credit-active consumers and a concerning 10.16 million of these consumers had impaired credit records at the end of December 2018.
But, what about taking the word and meaning of indebtedness a step further? What about the term: OVER-indebtedness? Isn’t the notion of it a bit worse than being merely indebted? Well, it is indeed a familiar term used by the NCR as well as the Debt Counselling industry. According to the Credit Act – section 79, over-indebtedness is described as the following:
“…A consumer is over-indebted if the preponderance of available information at the time a determination is made indicates that the particular consumer is or will be unable to satisfy in a timely manner all the obligations under the credit agreements to which the consumer is a party, having regard to that consumer’s –
- Financial means, prospects and obligations; and
- Probable propensity to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, as indicated by the consumer’s history of debt repayment…”
In a nutshell – you or other consumers can classify as being over-indebted when you do not have the means to meet all of your debt obligations or financial commitments at the end of each month. Does it perhaps ring a bell and is this description portraying your current financial situation?
By knowing the true meaning of the over-indebted concept – can indeed help you to know in what debt damage stage you are finding yourself in. But, the knowledge of the concept is nothing without knowing how to get rid of your over-indebted situation. So, what should you look out for and what can you do when you realise that you do classify as being over-indebted?
Get out those bank statements and be done with unnecessary luxuries
First things first – you have to go back to your ‘financial drawing board’:
- Print out your latest / previous three months’ bank statements to try and find those unwanted luxuries.
- The best will be to try and cut, whatever they are, out immediately.
- These spending luxuries can include things like impulsive online buys/sales or takeaway lunches/dinners/snacks.
- And, don’t forget to also take a look at your current ‘important spends’ as well – this includes taking a look at your current costs when it comes to investment holders, service agreement providers (mobile phone or gym contracts) or school fees – say, for example, private versus public schools your kids go to.
Yes, these above considerations or changes are not easy, but by changing a plan, fund or provider (that gives you the same/better deal for a lower price) can help your household, in the end, to limit your debt and some serious spending each month.
Communicate with your creditors if your payments are spiraling in arrears
Say you have taken the first step to try and fix your debt problem, but those creditor harassment calls are getting all too real – what do you do then? It is always a good idea to be proactive when you see that you are going to be / already in arrears, and speak to your creditors. If you do not try, you will never know. Ask for some breathing space for a few months but try your utmost best to work with your creditors and NOT against them. You did sign those agreements so you are liable to pay up as stipulated.
When the financial paw-paw has already hit the debt fan
If you have done all of the above and you know that your debt has already done enough damage, you need to get help. Fixing debt is not a one-man show. Go and speak to your banker and financial advisor. If you receive a stable form of income and you do not want to lose your assets like a home or vehicle, you can also look into the Debt Review process. A Debt Counsellor needs to be regulated by the NCR and can do an assessment to see if and how you can be assisted to clear your debt.
One final tip – rather sort out your debt damage NOW, than later. Don’t be an ostrich and hide or think your over-indebtedness will disappear – face reality and FIX YOUR DEBT NOW.