There are a variety of debt help options available to consumers in the South African economy – therefore there is no need for consumers to file for bankruptcy and sequestration the moment that debts start piling up.
Out of all of these remedies there are two that stand out above the rest in terms of consequences and the effect on the creditor’s credit score. These two remedies are also becoming the most popular forms of debt help in South Africa as consumers begin wising up to their debt rights.
Before considering any other debt help, consumers should try debt consolidation. This form of debt help involves taking out a loan in order to settle current debts. The loan then becomes the only debt attached to the consumer. These loans are usually paid off over a longer period of time, but the consumer can free up more disposable income during the month to save or spend on living essentials. One of the reasons that debt consolidation is the best option for a consumer is the fact that the interest attached to these loans are lower than the interest charged to other debts, and therefore although the consumer pays over a longer period of time, they do end up paying less in the long run.
If debt consolidation does not seem like the right option, a consumer should consider debt review in order to help with their debts. The process of debt review involves a debt counsellor who will negotiate with creditors on behalf of the consumer in order to reduce repayment terms. These terms will fall in line with the budget of the consumer, and creates a safe space for them to regain control of their finances. Debt review is lengthy and consumers can often balk at the loss of control, however consumers stand to lose far more than control if they do not seek help for debt when it is needed.
Article written by: Andrea van Tonder 04-2013