A large portion of the population in South Africa pays over 75% of their monthly income to creditors, leaving them with very little disposable income. With the remaining 25%, they have to pay school fees, buy food, pay transportation, energy and other daily living expenses. With no money left, consumers often turn to their credit cards or start to buy food on credit using store accounts. The consumers thus stay in debt and even one emergency, such as a family member passing away, vehicle accident, parents retiring without the ability to be financially independent or major dentistry needed, can push them over the edge.

Once in a situation where they have to juggle between accounts, borrow from friends or family members, and have to pawn items or make use of micro-loans just to pay their expenses, the consumers become desperate. At the same time, creditors start to call, since they need to protect against bad debt and letters to demand payment stream in.

The consumers then turn to their last options of juggling debt – they only pay one or two accounts a month and avoid calls. After a while though, the situation becomes unbearable and they cancel their insurance policies, medical aid where they can and do away with life cover. Then they withdraw all their unit trust investments and attempt to pay off a few debts. Unfortunately, some debts are just too large to pay once-off, leaving them with a situation where they risk losing everything.

The answer is debt counselling. South Africa is known for high living costs and incomes that don’t match the growing inflation rate. Unfortunately, we live in a materialistic society where adverts of wealth and beautiful items abound. Not realising how easy it is to get caught up in the debt cycle, the majority of consumers happily open new accounts. Not long after, they realise that they are only able to pay for the things they want if they keep on buying on credit, and thus the entire cycle starts.

Debt counselling in South Africa doesn’t only refer to debt review. It also covers debt management guidance. As such, a debt counsellor can recommend administration, sequestration or debt review, depending on the particular financial situation of the consumer. In other instances, the counsellor will provide financial guidance to help the consumer plan their finances better. This is true where the consumer still has enough disposable income to service debts if they simply plan better and spend less on unnecessary items.

In other situations, the problem lies not with over-spending or poor planning. It comes from being over-exposed and having unexpected situations requiring substantial financial expenses. Some consumers are retrenched and then struggle to find work for a few months. Any interruption in their income flow is enough to lead to a situation of bankruptcy.

Debt counselling in South Africa in the form of debt review is suitable for people who have proof of monthly income and have more than R50 000 debt, but their debt can be paid back within five years. The option is well-suited for people without any property looking for a way to pay their debt back at an affordable rate. Sequestration is suited for people with considerable debt and who have property, while administration is suited for people without income and who owe less than R50 000.

The first step to becoming debt free, however, is to get expert guidance from our team to help you determine the best debt management solution for your particular situation.