Tackle your debt head on with these financial solutions

Take a step towards financial wellness and consider debt consolidation or debt review to pay off your debts and regain control

05 April 2022 - 08:00
subscribe Just R20 for the first month. Support independent journalism by subscribing to our digital news package.
Subscribe now
Move swiftly to manage your debt without stress, says Old Mutual.
Move swiftly to manage your debt without stress, says Old Mutual.
Image: 123RF/zephyr18

If you have an overwhelming amount of debt, honest communication with a debt counsellor, and moving swiftly to find solutions, will help you manage it — stress free. 

Old Mutual Finance CEO Jan Moganwa says asking for help as soon as possible, instead of trying to sort things out on your own, is vital to future financial wellness. Moganwa says the sooner a financial institution is told about a debt issue, the sooner it can help. 

According to the Old Mutual Savings & Investment Monitor, 62% of South Africans are cutting back on spending, and in these difficult times, it is best to consider all the choices available.

Credit is a valuable tool that can be used to build a future and meet family’s needs. Like all valuable services, if it is not looked after and controlled, it can cause problems. If things do go wrong, the best thing anyone can do is talk to their credit provider, and if they can help, they will, says Moganwa.

One of the best ways of getting back on track is by debt consolidation.

“What many people don’t know is that debt consolidation makes debts controllable and can also save you money,” says Moganwa. 

This is because:

  • Instead of having to pay many accounts, all the debts are placed in one loan. 
  • One interest rate, instead of different interest rates on different debts, will be agreed to. Given that interest rates are at their lowest level in more than 30 years, customers are most likely to get a better rate depending on their financial position. The objective should be to ideally settle your most expensive debts first. 

“Debt review is another option available to over-indebted customers if debt consolidation is not a practical option. If you are seriously deep in debt and have been missing payments for some time already, your credit score might already be too low to qualify you for a debt consolidation loan. In this case, debt counselling may be your next best option,” says Moganwa. 

“Debt review is a process whereby a debt counsellor assesses your outstanding debt and puts in place a restructured debt repayment plan working with you. The debt counsellor may go as far as renegotiating interest rates and repayment terms with your credit providers to have some breathing space to tackle debts. Debt review is, however, a regulated process with pros and cons best discussed with a qualified specialist.”

People thinking about debt review should know that:

  • Only over-indebted people will be eligible. 
  • It is only for SA citizens.
  • Only people with jobs can qualify.
  • You cannot enter into any new credit agreements (you cannot apply for any loans or finance) while under debt review
  • If legal action is already being taken to recover money, this cannot be included in an application for debt review.    
  • It is not free. Counsellors charge for their work, and attorney’s fees must also be paid as all applications must go before a court or tribunal before an order can be granted.
  • All income and debt must be disclosed to the counsellor.
  • Credit bureaus information will alert credit providers that the providers cannot approve any more loans for a person affected. 
  • Repayment arrangements are made and agreed to if the repayment plan meets the credit provider’s conditions.
  • If married in community of property, both spouses must bring a joint application for debt review, and both will be considered to be under debt review.

The advantages of being under debt review are:

  • Only one amount must be paid to the counsellor every month. The counsellor then ensures that a payment distribution agency makes payments to creditors. 
  • Collectors and creditors cannot harass you.  
  • Your assets are protected from being repossessed by credit providers while you are under debt review.

“The aim of any of these actions is to help people regain control of their finances and pay off all their debts. It must be realised that both these events can take years to sort out. Communication and an honest approach to problems bring solutions and guard your credit rating — something that helps build a solid future and create a legacy,” says Moganwa.   

“As with all finances, having a budget can help avoid overspending. Budget properly, use credit well, and life can be easier and rewarding.”

Old Mutual loan offerings are made available through Old Mutual Finance (RF) (Pty) Ltd, a licensed Financial Services and Registered Credit Provider NCRCP35. Ts and Cs apply.

This article was paid for by Old Mutual Finance.

subscribe Just R20 for the first month. Support independent journalism by subscribing to our digital news package.
Subscribe now