Local advisor on debt – Don’t let monthly expenses overwhelm you

POLOKWANE – The rising cost of living, inflation and interest rates and no substantial increase in income has left South African consumers having to borrow more in an attempt to find breathing space.

According to DebtBusters’ Q3 2022 Debt Index, there has been more than a 30% increase in debt counselling enquiries compared to the same period a year ago, indicating the financial stress consumers are currently experiencing.

An increasing number of inquiries are from consumers who were first-time buyers of assets while interest rates were at historical lows before November 2021, while the number of debt obligations decreased from 7.6 to 6.1 per consumer.

This indicates more debt per credit agreement and that people are sooner reaching the stage where they are seeking assistance.

Local financial advisor Wessel Kotze said it is important to not make new debt as that will overwhelm you even more.

Kotze spoke to the Polokwane Review-Observer on to balance debt and monthly expenses and survive the month without feeling overwhelmed.

“The first step is to get three months bank statements. Go through every item and see where you’ve wasted money. The next step is to set up a budget and stick to it,” he says.

Kotze added that another way to save money is to cancel all subscriptions that you do not need or do not use.

“It is important not to make new debt as it can become very expensive. The economic situation in South Africa is not going to change any time soon and we have to start spending a lot less.”

Kotze says if you have problems paying your debt, it is advisable to speak to your creditors so that you can pay a lower amount.

“This means you will have a longer payment term but at least you can eat. Write down what needs to be paid and stop everything that is not needed. Most important do not make more debt to get out of debt,” he says.

The head of DebtBusters Benay Sager says consumers are using unsecured credit to supplement their income and average loan sizes have increased by 43% in just six years.

“Inflation and interest rates are very likely to keep rising into the new year and South Africans need to do everything possible to reduce the cost of credit and protect their assets,” a statement read.

For people needing help, especially to shield themselves against interest rate increases, Sager says debt counselling is a proven and effective way to do this.

You might also want to read: Demystifying debt counselling: NDC answers 14 commonly asked questions

Debt counselling allows consumers to pay back expensive debt faster as interest rates on unsecured debt can be significantly reduced. Agreements with creditors secures assets that are part of the debt-counselling process.

“Debt counselling in South Africa works exceptionally well. The number of people who have successfully completed the process has increased sixfold in the past six years. In Q3 alone people who received their clearance certificates paid back R430-million worth of debt to their creditors,” he concluded.