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Advice for a user who can't afford instalments

Jan 25 2016 15:33

A Fin24 user wants to know if she can pay less than the amount she initially agreed to.

The user writes: "Am I allowed to reduce a monthly instalment if I can't afford it any more?"

Renée Marais, NCRDC1780 Independent Debt Counsellor, advises:

The National Credit Act allows for a consumer to negotiate with a creditor to reduce the instalment; however, it does not require the creditor to accept it. If you do renegotiate and it is accepted, please get proof of the new agreement in writing.

If you contact a debt counsellor, they have the task to investigate your financial situation and if you are not yet overindebted but nevertheless experiencing problems to make payments to satisfy all or some of your credit agreements, an agreement can be reached with the creditors in question. 

This does have to go to court, as a legal process is required to change any terms and conditions of a credit agreement and the reduction in instalment and extension of the term agreed upon by both parties.

The repayment will be calculated on the outstanding balance at the time and interest will not be reduced and/or capped as it is an interim remedy. In this case whenever you want to revert back to the previous contractual terms it is easily done and a settlement amount may be provided at any time for you to settle the debt in full. Typically, such an agreement will be for a short term and usually will not exceed 24 months.

In debt review the matter is slightly different. The interest, costs and fees on the total outstanding balance are added for the remainder of the term and you have to pay the full contractual amount, whether your situation has changed or not.  

Typically the term is five years. The debt can be repaid in a shorter time if more funds become available but the amount to be paid will be the full contractual outstanding balance. You exit the debt review by paying off the funds as ordered by the court and you do not qualify for a settlement value as this will penalise the creditors, which is not what the act envisaged. 

After paying off the amount in accordance with the court order, a debt counsellor issues you with a clearance certificate which is sent to the National Credit Regulator (NCR) and credit bureaus to clear your name.

Please note that in this case the debt review for a large credit agreement e.g. a car or house must be dealt with very specifically, as a recent Appeals Court ruling pointed out that perpetual credit is a violation of the law.  

I strongly advise you to find a debt counsellor in your area so that you can have a face-to-face meeting. Think about it like this: would I let the petrol attendant service my car, the dentist's receptionist do my root canal or the nurse remove my appendix?

When you speak to the debt counsellor, ask to see their registration certificate. Do not make use of a call centre where you cannot verify that the person assisting you is registered in terms of the NCR. You can find a list of debt counsellors on the NCR website: www.ncr.org.za and ensure that when you do speak to the debt counsellor it is indeed the registrant.   

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Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.


money  |  money clinic  |  debt
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