Trapped in Debt? Here’s What Every South African Needs to Know About Real Debt Solutions

Approximately 10 million South African consumers, or one-third of the country’s credit-active population, are currently struggling to repay their debts. This includes those who are three or more months behind on payments or facing legal action related to their debt.

Further details:

• The 10 million figure represents consumers who are behind on payments or facing legal action as of September 2023, according to Credit Bureau Monitor data.
• This group represents approximately 37% of the 27 million credit-active consumers in South Africa.
• Some reports indicate that up to 75% of some consumers’ monthly income may be going towards debt repayments.
• Other reports suggest that more than 42% of the 23 million credit-active consumers in South Africa are considered “impaired,” meaning they are behind on payments or have judgments against them.
• This high level of over-indebtedness is attributed to various factors, including reckless lending, lack of financial literacy among consumers, and the rising cost of living.
• The average age of people seeking debt counselling which is one of the debt solution remedies currently available to South African’s was 41years of age.

In South Africa, several debt solutions are available to individuals struggling with over-indebtedness, including Debt Review, Debt Consolidation, Debt Counselling, and Sequestration. Additionally, Debt Management programs, Payment Holidays, and negotiating with creditors are other options for relief.

Debt Solutions currently available at ASI Wealth:

• Debt Review/Counselling:

A process where a debt counsellor assesses your financial situation, negotiates with creditors to reduce your monthly payments, and creates a restructured payment plan. This is a formal process under the National Credit Act.

• Debt Consolidation:

This involves combining multiple debts into a single, larger loan, often with a lower interest rate or extended repayment period. This can simplify payments and potentially reduce the overall debt burden. However, caution needs to be taken here as in some

instances these loans do not cover all the debt and there will still be some debt that will need to be serviced on top of the consolidation loan.

• Debt Management Programs:

These programs help individuals manage their debts by negotiating with creditors, restructuring payments, and potentially reducing interest rates, but there is no legal protection if the consumer do not adhere to these negotiations leaving them at a far higher risk. These negotiations is only done on the unsecured accounts which is all your debt except your bond and vehicle asset finance accounts.

• Payment Holidays:

Credit providers may offer temporary pauses in loan repayments, allowing individuals to catch up on their finances. But you need to have a good payment history in order to qualify for this solution.

• Sequestration:

A legal process where a person’s assets are handed over to a trustee to be sold to pay off debts, if other solutions are not feasible. If there is no assets this option can still be made available to a consumer as voluntary sequestration is only a 24months process.

• Negotiating with Creditors:

Individuals can directly negotiate with their creditors to reach agreements on payment plans or reduced amounts.

Other Considerations:

• Credit Report and Repair:

Monitoring and repairing your credit report can help you understand your credit standing and potentially improve it.

• Financial Planning:

Seeking guidance from a financial advisor can help individuals develop a comprehensive financial plan to manage their debt and improve their overall financial situation.

• Legal Advice:

Consulting with a legal professional can provide valuable insights into debt-related legal matters and rights.
Choosing the right solution depends on your specific circumstances, the amount of debt, and your ability to repay.