Reduce debt during Savings Month

"Of the 18.60 million credit-active consumers, nearly half have impaired credit records and are battling to service their debt. The number of consumers with impaired records increased by 20 000 to 8.63 million in March 2011 quarter, from 8.61 million in the December 2010 quarter. This is happening, despite the fact that interest rates are at their lowest in about 30 years."

Some of the things you can cut and/or adjust in order to stay afloat are alcohol, tobacco / cigarette, entertainment, club membership, pay / satellite TV and gambling. Use public transport where possible. You will find that by cutting these items out of your budget, you might have more cash. You then have an option to either save that money or pay more on your accounts and reduce your monthly debts. Use this as an economic strategy to assist you to get by.

Tongoane advises debt-stressed consumers to play an active role in freeing themselves from over-indebtedness. "When you are experiencing problems with repaying your debts, contact your creditors and discuss your situation with them first.

"If you are not winning with your creditors, you have an option to approach a registered debt counsellor for assistance. Over-indebted consumers may approach a debt counsellor directly, or may be referred to a debt counsellor by creditor/s or by the magistrate court.

"As at end of June 2011, 257 499 consumers had applied for debt counselling. We estimate that there are between 105 000 - 110 000 consumers who are actively under debt counselling with registered debt counsellors. The number fluctuates based on daily applications, terminations, consumers voluntarily surrendering from the process and consumers that have rehabilitated.

"A debt counsellor is someone who is registered with the National Credit Regulator and who assists consumers who are experiencing debt-related problems and are having difficulty making their current monthly repayments by providing them with budget advice, support and mediation with credit providers."

Court rulings on debt

Consumers are advised that if they apply for debt counselling, they may not get any further credit until their debts have been repaid or have been issued with a debt clearance certificate.

"Earlier this year the Supreme Court of Appeal (SCA) ruled on two matters affecting over-indebted consumers.

"Firstly, it ruled that as soon as a consumer received a Section 129 Notice, in respect of a specific agreement, that agreement is excluded from debt review. However, the consumer can still apply for debt review in respect of the other agreements.

"The other matter refers to Section 103(5), indicating that all the charges (and not only interest) that accrue, while a consumer is in default, may not exceed the outstanding amount. From that point in time the credit provider cannot charge any further interest, costs and charges until the consumer has settled anything in arrears."

He advises consumers not to sit back when they are experiencing financial difficulties and not wait until they receive letters of demand or section 129 letters, as it will be too late. "That particular debt will not be included under debt counselling."

Tips

• Start saving today - saving some money every month will assist you in future.
  
• Always do a budget and stick to it.
  
• Never skip your payments - even when you are under debt counselling, continue making payments, because if you do not pay, you could lose your house or your car.
  
• Prioritise your home loan - never skip your mortgage payments.
  
• Do not cancel your short term insurance cover. If something happens to the car, you may be faced with higher costs than if insured.
  
• You have the right to one free credit report annually from registered credit bureaux, utilise this right and know your status.

Consumers who are struggling under the yoke of over-indebtedness can log on to www.ncr.org.za for a list of debt counsellors or alternatively call +27 (0) 860 627 627 for assistance and advice.