R10 000 car payment worries user | Fin24
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R10 000 car payment worries user

Mar 27 2015 07:19

A Fin24 user who pays R10 000 for his car instalment and suspects he may be overindebted, seeks advice. He writes:

I am 26 years old and I would like to know if I am overindebted. Lately I feel my salary is not enough. This kind of thought is bothering me. I sometimes ask myself if I am overindebted or am I just being greedy.

My net salary is just above R24 000 a month and my total expenses is R19 000.

I strongly believe I am paying too much for a car, but I can't downgrade as my car is fairly new with a high settlement value.

I even thought of accepting an offer from a friend to take over my car repayments but I think that's too risky.

My expenses are as follows:

Damon Sivitili from DebtBusters responds:

Based on the information you provided, you are not overindebted because your net salary (R24 000 less your expenses R19 000) still leaves you with R5 000 at the end of each month.

However, you need to make sure that you include all of your living expenses in your budget such as entertainment, groceries, vehicle maintenance, water, rates, electricity, bank charges etc.

If you are starting to borrow money from friends or credit providers each month because you run out of money before payday, you probably are overindebted.

Looking at your expenses, your car payment is significantly large. It may be necessary to think about downgrading as you can get a very decent car for as little as R2 000 to R3 000 per month, which would free up R7 000 to R8 000 every month.

This would relieve the debt stress you are currently facing and allow you to start saving and investing more on a monthly basis.

Independent Debt Counsellor Renée Marais NCRDC1780 adds:

Consumers are overindebted if their netto income (take home pay) is insufficient to pay for essential living expenses and service their debt. Essential living expenses are defined in the National Credit Act 34 of 2005 and the amendments of 13 March 2015.

Debt is something that you have to repay that includes a fee, charge or interest (or that two prices were quoted and discount offered for quicker repayment) and may also include something that was not initially intended to be debt e.g. a doctor's account.

There is also something called reckless lending which a debt counsellor may look into for you or you may refer to the National Credit Regulator, National Consumer Tribunal or a court of law.

Reckless credit happens when the credit advancement was made by the creditor when they have not done an affordability assessment or if they have, the granting of the credit would have resulted in the consumer becoming overindebted.

In this case, there is a strong possibility that the consumer is indeed overindebted and with rising costs of utilities, petrol (transport), toll road increases, personal income tax and possible rises of the interest rate by the South African Reserve Bank, the consumer will soon have problems keeping to the commitments mentioned.

It is advisable that the consumer seeks professional advice from a reputable debt counsellor (do not entrust your financial freedom to a non registered and verified person) before you run into difficulties.

READ: High salary earners struggle to make ends meet

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money clinic  |  debt


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