A Fin24 user is looking for a way to manage his debt without destroying his credit record. He writes:
I am in need of advice. If I apply for debt counselling, when should I do so?
I currently have a personal loan costing R2 200 per month, my rent is R2 500 p/m, transport adds up to R1 500 p/m, my credit card (maxed) is costing me R1 000 p/m and food adds another R2 000 p/m to the total expenses bill of R9 200 p/m.
My overdraft is maxed out at R23 000, credit card at about R24 000 and I have a loan of around R160 000.
My income is about R11 000 p/m before tax and deductions. I previously earned R6 500 p/m.
That’s probably my main reason for all this debt.
My eldest son does work and covers most other expenses (not listed) when he can. I have a 15-year-old son as well and am divorced. I have no extra income.
I haven't missed any payments yet.
What can I do to get myself out of this situation, but without destroying my credit record as this is very important when applying for other jobs?Friedl Kreuser of Summit Financial Partners responds:
Based on the amounts you provided, you should technically have enough money to pay your debts each month but, as you say, it is uncomfortably tight.
Section 86 of the National Credit Act does provide an option for consumers to apply for debt counselling if they are not technically over-indebted but feel that they may struggle to pay their debts if their circumstances change at all.
This would allow the debt counsellor to restructure the consumer's debt for a bit of breathing space before they hit a debt crisis.
This could be a very beneficial way to take the pressure off your monthly cash flow, while still making sure you're servicing your debt.
However, going under debt counselling will affect your credit record and prevent you from accessing any further debt until everything you owe is paid off (or you withdraw from the process).
If you feel this will affect your future employment options (it would depend on the type of work and the perspective of the employer), you should consider other options first.
The only real alternative is to try to make voluntary arrangements with your credit providers to pay only slightly reduced instalments for a set period (e g six to 12 months).
If you do decide to do this:
- Take a detailed budget with you - showing income, expenses and debts - to illustrate your financial situation in black and white;
- Make sure you negotiate realistic payments that you can stick to; and
- Make sure any agreements are confirmed in writing by the credit provider.
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