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A Fin24 user, a single mom struggling to make ends meet, is seeking advice on how to free up money to be able to buy a car to take her son to school. She writes:
I am a single mom of a 3-year-old boy living in a 1 bedroom flat. My 60-year-old mom also lives with us.
My living expenses are set out below.
Please kindly advise how I can get out of debt as I need money to go for driving lessons and buy a car in order to transport my son in the winter months.
Debt experts Renee Marais and Kelli Knutsen agree that the Fin24 user is over-indebted and needs to consider debt counselling.
Both experts noted that the user's expenses far outweigh her income as she has not even factored in her basic living expenses, such as food, clothing, transport costs, electricity, etc. That makes her over-indebted and one of the best remedies to address over-indebtedness is debt counselling, according to both Marais and Knutsen.
Through debt counselling a debt counsellor will assess and restructure the user's debt. The counsellor will also negotiate the terms of debt repayments with the credit providers.
“Debt counselling is a tool to help people pay off their debt. It is a remedy best suited for individuals who are over-indebted and struggling to make regular monthly payments.
It is also a legal process which will provide the user with legal protection and will help her pay off her debt,” says Knutsen. The process will bring debt repayments in line with the user's affordability, as additional fees are stripped away and interest rates are reduced, she added.
For starters, Marais advises the user first reduces her R3 500 she repays on store accounts and the R470 on the personal loan as these carry the highest interest rates. She can also have the payment term extended in order to free up some funds for necessary expenses.
Marais recommends that the store cards be destroyed and the access to credit be cut off for the duration of the debt review period.
Both experts caution the user to find a reputable debt counsellor - "someone in the area where you work or stay and whom you can go and see face-to-face".
"You need to be aware that you will be in a relationship with this person (debt counsellor) for the next five or so years while s(he) pays off your debt, therefore you must be able to trust the counsellor.
"Make sure that the debt counsellor is registered with the National Credit Regular (NCR). The person who counsels you must be able to show you his name and ID number on a NCR registration certificate," says Marais.
To confirm if the person is registered with the NCR, you can go to the NCR website and click on search for a debt counsellor.
"A call centre or admin agent cannot assist with debt review matters; it is against the law (section 44(2) of the National Credit Act 34 of 2005).
"A debt counsellor must provide you with a repayment plan and information about the process and fees in writing. Only once you are in a better financial position and have eradicated your debt, can you look at purchasing a car," the experts conclude.
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