Face up to what you owe

During the month of August, the National Credit Regulator (NCR) will be focusing on women and finances as part of its drive to educate and inform consumers about the National Credit Act and finances in general, says Nomsa Motshegare, Acting CEO of the National Credit Regulator (NCR).

Credit Bureaus records show there are 18.60 million credit active consumers, with some being women. 46.4% consumers have impaired records. An impaired record is a record on which a consumer and /or any of his/her accounts, are either classified as three or more payments or months in arrears or which has an adverse listing, or that reflects a judgment or an administration order.

“Our debt counselling statistics reveal that there were over 260000 debt counselling applications as at end of July 2011 with an estimation of 105 000 - 110 000 consumers who are actively under debt counselling with registered debt counsellors. Due to applications, terminations, consumers voluntarily surrendering from the process and consumers being rehabilitated, the numbers fluctuate daily,” states Motshegare.

“From our data it is evident that there are consumers battling with debt repayments and women are thus not immune to this.” There are numerous factors that may cause women to become over-indebted such as a change in circumstances like a death in the family, divorce, retrenchment, ignorance of financial products, a lack of proper planning, social pressures from peers and family, funding an extravagant lifestyle such as buying designer clothes and accessories using store cards, putting an expensive holiday on credit cards or charging the latest gadget to store cards. Reckless lending and increasing interest rates may also lead to over-indebtedness.

“A lack of understanding of crucial terms and conditions in credit agreements, such as interest rates and other fees can lead to women taking on loan commitments they can’t afford,” says Motshegare. “Debt not only wipes out your monthly income, but also affects your ability to save for the future.”

If you’re looking to break the debt cycle, seek advice as soon as you realise you are running into trouble. Do not wait until after you have defaulted on any credit agreement. Credit Providers are at liberty to enforce on those agreements as soon as you default by issuing a notice of your default. Look out for signs such as using your credit card and overdraft facilities to pay debts and to buy food and other necessities or missing payments on some accounts in order to pay others. Receiving letters and summonses from credit providers or lawyers mean there could be a judgment against your name and you need to take action immediately by contacting your creditors and seeking assistance.

“Missing repayments and hoping for the best is not a good strategy, as this will affect your credit bureau record by reflecting negative behaviours which is not good for you as a consumer. Negative behaviours will work against you when you apply for further credit,” adds Motshegare.

The first step in tackling debt is to draw up a detailed budget that accurately tracks your income, expenses and debt. If your expenses far outweigh your income, it’s time to go on a financial diet. This means repaying your debt aggressively and cutting back on spending. Keeping a spending diary for at least two weeks can help to identify where you are spending money unnecessarily.

“Make paying off your debts a priority,” says Motshegare. “If this means getting a weekend job or selling some of your possessions to help you achieve this, do what it takes to improve your financial situation.”

She says if you're struggling to pay your debt and cutting back on expenditure doesn’t seem to help, there are ways to reorganise your debt. Contact your creditors first and explain your situation. If they cannot assist you, remember that under the National Credit Act (NCA), over-indebted consumers can use the services of a debt counsellor.

“A debt counsellor will conduct a thorough budget analysis and negotiate with credit providers on your behalf on lower instalments if you are found to be over-indebted,” says Motshegare. “However, debt counselling doesn’t mean cancelling of debt. The NCR can provide a list of registered debt counsellors in your area who can assist with getting your finances back on track.”

Once your debt counsellor has approached your creditors and submitted your proposal to them and they have agreed, your debt counsellor needs to obtain a consent order for you. As a consumer, you need to make sure that you continue making payments. Failure to pay your debt whilst under debt counselling, will terminate the service. This will mean that you will lose protection under the National Credit Act and creditors will be able to continue with legal action against you. However, if one or more of your creditors do not accept the debt counsellor’s proposal, then the debt counsellor needs to refer the matter to the magistrate court for a court order.

“Please remember that if you are under debt counselling, you will not be able to access any further credit, adds Motshegare.” Channelling as much money as possible into your debt repayments means you can pay the principal outstanding amount faster and reduce interest.

During this women’s month, the NCR encourages women to:

1. Always act when experiencing financial troubles by contacting your credit providers and explaining your situation.

2. Seek help from a debt counsellor – if your credit providers are not willing to assist, approach a registered debt counsellor who will assist you to manage and restructure your debts.

3. Never skip your payments – even when you are under debt counselling, continue making payments, because if you do not pay, you could lose your house or your car.

4. Prioritise your home loan – never skip your mortgage payment even when under debt counselling, pay as much as you can.

5. Request a copy of your credit report from registered credit bureaus. Remember you are entitled to one free credit report once a year. Call the NCR for additional information.

6. Start saving today – saving some money every month will assist you in future.

“An informed consumer is a protected consumer. Understanding how to manage and control your debt is one of the most powerful tools you can use to secure your family’s financial future,” concludes Motshegare.