Millions of South Africans are in debt and have no plan to break the spiral of debt

Daniel Shapiro – Alefbet Collections & Recoveries

The best way to take control of your debt is to have a clear understanding of your financial commitments, how much you’re paying to service debt, and renegotiating credit agreements when possible.

— Daniel Shapiro – Alefbet Retrievals

JOHANNESBURG, GAUTENG, SOUTH AFRICA, April 18, 2022 / — In an environment of rising interest rates, falling monthly household incomes, rising inflation and higher fuel prices than We have never experienced in our history, South Africans are facing extraordinary financial headwinds and struggling to repay their debt on credit cards, store/retail cards, overdrafts and personal loans. Indebted South Africans have reached a point where the overall debt-to-annual net income ratio across all income brackets has reached its highest level on record.

“In real terms, the average net salary in the private sector has also fallen, exacerbated by the economic challenges caused by the pandemic and the slow economic recovery. At the same time, consumers are still asking for unsecured credit, which indicates that they are using credit simply to switch from month to month. This type of credit only serves to increase consumption and get you into more debt – think of buying groceries with your credit card, entertainment and restaurants, clothing, clothes with store cards, etc. . As interest rates climb after the pandemic pause, the rising cost of servicing that debt now leaves millions of South African families trapped in a spiral of consumer debt,” says Daniel Shapiro, of Alefbet Recoveries , a collections call center group that includes Shapiro. Shaik Defries and Associations, Metropolitan Revenue Collections and ITC Business Administrators.

The best way to take control of your debt is to have a clear understanding of your financial commitments, how much you are paying for debt service, reducing all non-essential expenses, and renegotiating your agreements. credit where possible,” he adds.

Shapiro offers the following tips for consumers who are struggling to repay their debt:

• If you are having payment difficulties, proactively engage with your creditors!
Don’t ignore your creditors – debt won’t go away without action. Without a response from you, your unpaid debt will move to the legal stage, which will inevitably become more difficult and will have a negative impact on your credit rating and your future personal financial health – something that is very difficult to rectify a times compromised and that impacts your ability to get any form of credit in the future, and the cost at which you get it, for years to come.

The best approach is to proactively approach and negotiate with creditors and lenders from the outset. If you are contacted by a debt collector, explain your situation so they can work with you to find a solution. Different types of debt have different options – you might be able to temporarily suspend payments with a loan modification or lower monthly payments or interest rates by reaching an agreement with the lender. Creditors would much rather reach a workable agreement than take legal action and many debtors are surprised to find that they are open to entering into alternative arrangements where appropriate and fair. By working with your creditors and sticking to agreements, you avoid the consequences of having your assets seized, the stress of being legally sued for your unpaid debt, and seeing your credit report damaged, usually for years. Bottom line – go ahead and negotiate and proactively engage with your creditors.

• Think very carefully about debt review
Although a debt review may be an option for a heavily indebted consumer, it is not a process that should be undertaken lightly. It’s important to know that once you’re in debt review, you can’t get new credit and you can’t get out of the process until you’ve cleared all of your debts. This means that even if your situation changes in a few months and you are able to resume your regular monthly payments again, you cannot leave the debt review process until all of the debt is cleared. not refunded. During this period – which can be up to 5 years – you cannot obtain credit, such as a loan for a car, a mortgage, a student loan, etc. Your only option would be to pay off the debt faster to shorten the time you spend reviewing the debt. If you can’t see any other clear way, engage with a reputable and professional debt review agency who will clearly and transparently explain all the implications of this process to you in advance. Be aware that there are also fees associated with the debt review process that you will need to pay upfront.

• Entrenched?
You may not even realize that you have credit insurance on some of your loans, retail accounts, and credit cards that are there to protect you if you are laid off and unable to repay your debt. Check all your loan agreements and see if a credit insurance policy is active – these are usually in place for the entire term of the loan or credit agreement. This insurance can cover you for up to 12 months of debt repayment if you are made redundant, subject to the terms of the policy.

“Finally, as you progress through paying off your debts, remember that debt and credit usually come with interest, which means the more you will pay the longer it will take to pay off your debt. As you pay off a debt or credit agreement, divert the money you used to pay to complete your next repayment, which means you’ll significantly reduce your term and the interest charged. he most important aspect once you’re done is putting the money you were spending on debt repayment into a savings or investment account to provide you with a much-needed emergency fund,” concludes Daniel.

Shapiro Shaik Defries & Associates
+27110190001 ext.
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