More Useful Stuff
MYTH You’re an idiot for getting into debt
If that’s the case, then the world’s filled with halfwits. “Until fairly recently, credit was freely available in South Africa,” says Hussain Savant, a debt counsellor registered with the National Credit Regulator. “This led to credit spending on an unprecedented scale, resulting in the unpleasant economic situation we’re all experiencing now. The problem is made worse by high interest rates, the volatile rand/dollar exchange rate and the overall sagging of the global economy.” His advice: don’t let emotions cloud your financial judgement.
MYTH You must be in debt to see a debt counsellor
Anyone can go and, if you’re worried your finances are heading downhill, it’s not a bad idea to see a debt counsellor on a monthly or bimonthly basis.
Already hit the bottom? “If you are burdened with serious debt, or have received Letters of Demand, then it’s crucial you see a registered counsellor soon,” says Savant. “You’ll probably be placed under what’s known as ‘debt review’, and a counsellor will analyse your debt in order to determine the degree of the over-indebtedness. He will notify your creditors that you’ve applied for debt review and whether or not you have been found to be over-indebted.”
According to Savant, you then have a 60-day window within which your debt must be restructured and submitted to the creditors for approval.
HIT There are different types of debt
Bonds and vehicle finance fall into a separate category to credit cards, personal loans and overdrafts. “Secured debt (bond or vehicle finance) will usually be at a lower interest rate than unsecured debt (credit cards or overdrafts),” says Luke Hirst, a debt counsellor with www.debtbusters.co.za, “as there is an asset attached to a secured loan.” Remember, if you don’t make your payments on a secured debt, the bank will take it back. Fact: South Africa saw a 93 percent year-on-year rise in car repossessions between the July to September period in 2007 compared with 2008.
MYTH Anyone can help you get out of debt
As much as you value your cousin’s advice or want to believe that miracle-promising ad in the local paper, you need to beware of fraudsters. “Unregistered debt counsellors are not legally empowered to negotiate with creditors on your behalf,” warns Savant, “and they’re not legally entitled to restructure your debt.” To be on the safe side, always ask to see the debt counsellor’s registration number, which can be easily verified with the National Credit Regulator (www.ncr.org.za ).
HIT Your name will be cleared once your debt is paid
When you’ve paid it all off, you will be allowed to apply for credit again. “When all the debts are extinguished, the debt counsellor will issue you with a Clearance Certificate, which will be sent to all your credit providers and the Credit Bureau,” says Hirst. Here’s hoping you’ll be a little more money savvy and not head directly to the local store flashing plastic.
MYTH Debt counselling is only about finances
“It has a legal and psychological dimension as well,” says Savant. “A debt counsellor not only counsels people on how to get out of debt, but how to avoid getting into it, plus they negotiate repayment terms of current or existing debt. They even arrange to have certain debt obligations extinguished outright.”