Debt despair – what are your options?

Debt despair – what are your options?

Severe financial difficulties often leave people feeling overwhelmed and lonely. Reaching out for advice and support is the first step towards regaining control of your finances and your feelings.

“It’s never too late to help yourself and take steps towards rehabilitation,” advises Mark Young, Deputy CEO of

Bayport. “Debt, and deciding how to deal with it can have a significant impact on your future access to credit and other financial services, but it’s far better to recognise and acknowledge a debt problem and act appropriately than not deal with it at all.”

“Reviewing your current expenditure and deciding how you can better manage and control expenses is often the first step in the right direction. If you are having trouble managing your repayments, an option is to combine all your loans into a single facility. It is important to consider all your options as well as your potential financial needs, before making a final decision”.

Young says that while the maximum prescribed interest rate on unsecured lending will probably decrease by nearly 8% from May, which will help to alleviate debt burdens, it is not a solution in itself. “When people are in financial stress, they often need professional assistance to make a fresh start.”

In some cases, renegotiating payment terms with credit providers will do the trick; in others, measures provided for in the National Credit Act will need to come into play.

Debt Counselling

Debt Counselling is provided through a reputable debt counsellor who will offer you temporary relief, whilst still ensuring you meet your obligations. It is a legal process that combines debt repayments into one affordable monthly payment, which is then distributed among your credit providers. You may also have the option to extend your repayment terms with reduced costs and interest fees.

Debt Administration

Debt administration focuses on reducing your debt instalments and typically pays your credit providers on a rotational basis. The implication is that a particular credit provider may only receive payment every three months, which could see interest on the loan skyrocketing. This debt relief option is only available to those with debts of less than R50 000. Fees for this service come in at 12.5% + VAT and distribution costs per month.

Debt Enforcement

This legal process is followed by your credit provider when you default on your credit agreement and results in a court summons and the possibility of a judgment against you. A judgment will reflect on your credit report for five years or until you have paid off the full amount. While you do have the legal right to defend yourself if you feel you have a case, you must be sure you have a real chance of winning before going down this road.

Voluntary Surrender of Goods

If you are unable to make a payment on goods for which you have taken on credit, you can choose to give them back. The retailer will sell your item and you will only be liable for the difference between the amount you owe and the amount recovered from the sale.

Depending on the size of your debts, you can hire debt administrators or debt counsellors to help you take care of your bank balance – and your peace of mind.

“Many people face a financial crisis, which can seem overwhelming, at some point in their lives,” says Young. “But it doesn’t have to go from bad to worse and there are many steps that can be taken before creditors take legal action. With expert advice and assistance you can create a money management plan that is appropriate for your individual circumstances.”