Debt management amid Covid-19 and beyond

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This webinar was hosted by Debt Rescue and the Mail & Guardian. It featured, from Debt Rescue, Neil Roets, founder and CEO; Annaline van der Poel, COO; and Pascal Sinclair, Chief Relations Officer.

A recent poll run by Debt Rescue found that 85% of South Africans have been affected by the Covid-19 crisis, and only 11% said they would be able to pay their loans back when the payment holiday is over; 45% said they had been affected by retrenchments and salary cuts. There will be extra pressure on us in the coming months, in the form of petrol prices going up and the subsequent increase in other goods prices. The interest rate may also increase soon, and credit providers are starting to collect on their debts.

Debt Rescue was founded in 2008 and has helped thousands of South Africans since then. Debt counselling has been streamlined and allows those in debt to pay off credit at lower rates; it protects them from their credit providers and enables them to meet their monthly living expenses.  The repayment plan ensures that debtors are protected by law.

Annaline van der Poel, Chief Operating Officer, Debt Rescue

Annaline van der Poel said to manage our debt we have to budget properly and see where cuts can be made, and see what is left to cover our debts. There is hope for those who have lost their jobs due to the Covid-19 crisis can take the debt counselling option, said Pascal Sinclair; Debt Rescue’s payment distribution agency takes care of your debt, it pays your credit providers, and over 80% of clients are thus able to make their payments to creditors each month. A recent survey revealed that debt counselling is a reliable collection tool for creditors.

There are other debt relief measures in South Africa. Administration is applicable for small debt and a single account, below R50 000; one applies for an extension to pay back the debt. Repayment can take a long time due to interest. Sequestration involves surrendering your estate to a curator and you lose your assets to lessen your debt burden. This is for people who have had a huge change in financial circumstances, such as losing your own business. In sequestration, there must be an advantage for your credit providers; for instance, your home or other loose assets will be sold and the money from that given to your creditors.

Debt consolidation is basically a loan you take out to pay off your other loans. The advantages are that you pay off to one place, but the disadvantages are that interest rates are high; there is also no legal protection for your assets; and they are usually capped at a few hundred thousand rand. Banks often do consolidation through your home loan; but “you can’t borrow your way out of debt”. If you find yourself in this situation, it’s time to ask for help.

To apply for debt counselling, you must be able to prove that you can make some form of monthly payments; this may be in the form a family member helping you, such as your spouse. What are the costs involved? The fees are regulated in this fantastic piece of legislation. There are no additional fees over and above your monthly repayments in debt review.

Are payment holidays a sustainable solution? Each bank has their own terms, and its usually only the customers in good standing that benefitted. Some banks may extend their relief periods, but there will be fees charged, so it’s just an interim solution. It was better for the banks to adopt a wait and see approach but as the lockdown eases, debt collection is starting to take place; we are no longer in limbo.

Pascal Sinclair is Chief Relations Officer at Debt Rescue

There are a number of quick fix money making schemes out there at present, but remember, if its sounds too good to be true, it probably isn’t. These are desperate times, and there are people who try to take advantage of desperate people. Don’t gamble with your money right now!

Stokvels: are they a good idea? These are pool saving schemes that members contribute to on a monthly basis. Each individual gets paid out at a certain predetermined time. The problem is that now with Covid-19, some people may not be able to make their payments. It’s important that people are educated about where and when to save. “Covid-19 has taught us that nothing is secure,” said Sinclair.

The poll run during the webinar revealed that 85% of respondents have been affected by the Covid-19 crisis. Neil Roets said that it’s important for those in trouble to seek help before it is too late.

Several questions from the webinar participants were then answered.

  • It is important to do your research when approaching a debt counselling company; what is their track record like? Ask your credit providers, as they work with debt counsellors.
  • If you are in debt and have approached a debt counselling company, there is a period in which court dates will be set, and you are then protected from your debt providers.
  • Different insurance companies have different conditions regarding debt counselling.
  • Regarding payment holidays, your interest will continue to accrue.
  • When applying for debt counselling, you don’t have to do it physically; correspondence can take place through emails or platforms like Zoom.
  • Always try to ascertain what the credit terms are when taking out a loan.
  • There are no minimum or maximum limits regarding debt counselling.
  • Once you have cleared your debts, a clearance certificate is issued and forwarded to the relevant credit bureaus.
  • If you are unsure of the terms of your credit provider regarding insurance for things like retrenchment, contact them to see what the agreement states

Debt review is better than debt administration; it caters to all income groups and you have the advantage that you can talk to the counsellor, so it is a more holistic solution. During the lockdown, credit providers gave some leeway to those in debt; if you have been retrenched, talk to your debt counsellor to keep everyone informed about your financial situation. If you are thinking of taking out new loans, ask all the right questions and make sure that you understand all the terms and conditions.

It is always good to communicate with your credit providers; all of them want the maximum they can get from you. Debt counselling looks at all your credit providers to ensure they all get paid, so its far easier than doing it yourself.

Your employer doesn’t have to know that you are under debt review, and future employers don’t need to know this either. If the issue does arise, it shows that you chose to take the responsible decision to manage your debt.

Prescription means that your debt has expired, which happens after a certain period of time. Collection of prescribed debt is illegal.

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