Cape Town – The number of consumers getting themselves into a debt
tight spot keeps growing despite a burgeoning debt assistance industry.
The latest figures released by the National Credit Regulator (NCR)
showed a quarter-on-quarter increase of nearly 200 000 consumers with impaired
The number of consumer accounts increased from 69.53 million in the previous
quarter to 70.73 million in the quarter to June 2013.
The options available to consumers to help them lighten their debt
burden include Administration, Debt Counselling and Voluntary Sequestration.
Another less costly one is for consumers to try and negotiate
directly with their creditors, said debt expert Moeshfieka Botha.
She, however, cautions that creditors are under no obligation to
accommodate a debtor’s request for lower, more affordable repayments.
“When you incur debt you enter a contract with the creditor. This contract
is legally binding and the creditor has the right to enforce all aspects of the
contract, including repayment amounts.”
user recently asked if his account payments can be put on hold.
You can try to approach your creditors to put
collections on hold, Botha advised, but they are under no obligation to help you.
“There is no legal way to force creditors to put
collections on hold, and they are under no obligation to wait for you to sort
out your finances, no matter who is responsible for the situation.”
A debt counsellor can however negotiate for lower
repayment on your behalf, said Botha.
Another Fin24 user tried both Sequestration and
Debt Review, but found that renegotiating with the creditor himself actually
reduced his monthly burden.
Debt expert Ian Wason however said renegotiating through
a debt counsellor would not only have reduced your payments, but also lowered your
fees and interest rates.
“By coming out of the debt
counselling process and negotiating with your creditors directly, you may have
been able to reduce your installment, but your interest rates will go back to
the original rate, therefore in the long run costing you a lot more money.
“Also after a period of time, the
creditors may and in many cases will want to increase the installment you are
paying to reduce the capital debt.
“This can come as a shock and if
not paid will lead to legal action and the potential for a garnishee order
against your salary,” said Wason, advising that the user rather discuss his
situation with a debt counsellor, who will ensure he pays a realistically
affordable installment each month, as well as paying off the actual debt rather
than just servicing the interest and charges.
Roger Brown, attorney and CEO of Credit Matters, concurred, saying
consumers should use the process of Debt Review to their benefit.
"Debt Counselling (also known as Debt Review) is part of
legislation put in place by the government to assist the over-indebted."
With the cost of living continuously increasing consumers should seriously
reconsider entering into debt contracts, said Botha.
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