Educate yourself to avoid bad debt
Become financially literate to weather the Covid-19 storm
SOUTH Africans have battled with financial literacy for decades, and the current Covid-19 pandemic has just made matters worse, increasing job losses and impacting the economy.
Against this backdrop, experts warn that post-Covid-19 debt management is going to be challenging.
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Some key pre-lockdown financial issues South Africans faced included developing a savings culture and understanding of responsible credit use.
BusinessTech laid out some stark South African debt facts in an article last year:
* According to National Credit Regulator (NCR) statistics, 84% of South Africans who earn R15 000 a month or more, have some form of debt, with unsecured loans and credit cards the fastest-growing types of debt.
* The Debt Counselling Association stated that 10 million South Africans have bad debt – missing three or more monthly repayments.
* A survey conducted by the Debt Association found that those with bad debt were borrowing for daily necessities, while also cutting back on medical aid and insurance policies.
Credit Life Insurance (CLI) is often, but not always, mandatory with certain types of loans.
However, because the institutions providing the loan generally provides the CLI, it’s common for CLI policies to be bundled into a single overall payment structure.
This leaves consumers unaware that they have the policy at all.
Consequently, CLI claims rates are among the lowest of all South African insurance lines.
FinTech offers new forms of value to hard-pressed South African consumers, with potential to positively impact the country’s ability to negotiate the turbulent waters ahead.
However, for this contribution to be fully realised, consumers must be empowered with a combination of great tools, and a clear understanding of how to use them.
With CLI, for example, every borrower – regardless of the loan type – should be made aware if a CLI policy is attached to their loan.
Understanding the protection the CLI policy provides, how much the individual is paying for that policy, and how to claim, is important.
Borrowers also have the right to choose the CLI service provider, regardless of who is giving credit.
This clarity is required across all financial sectors, from digital banking to insurance and beyond.
If South Africans take the right kind of actions today, they will be better placed to take advantage of opportunities offered by new technologies. This will create better financial value and protection, even in times of a global crisis.
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