Getting out of debt

You do not become over-indebted overnight. There are signs to show you that you have problems with debt:

You don't know how much you owe.
You often pay your accounts late.
You get a new loan to pay old loans.
You avoid opening mail with statements.
You pay only the minimum balance due on your accounts and credit card each month.
You spend more than 20% of your income to pay back debts.
You're spending more than your income and using your savings or loans to pay for day-to-day expenses.

What if you cannot pay your accounts or the instalments on your loans?

If you have difficulty to repay your loans, you could do the following:

Take another look at your budget

Spend less
Be realistic about what you can afford

Contact your creditors

Please look under the heading "Resources" for the contact numbers of organisations that may be able to assist you or give you more specific information.

Talking to your creditors

Tell them why you can't pay, that you intend to pay, and when and how much you will be able to pay.

Try to work out a new payment schedule with your creditors. If you agree to something, you must keep your promises.
If possible, continue to make the minimum payments.

If you are over-indebted, consider the following:

Tell the creditors that you are not able to pay the agreed amounts at the agreed time.
Try to negotiate with the creditors to pay a smaller amount for a longer period. If you do this, the lender will charge you extra in fees and in interest. However, it is better to pay these extra fees than to get a bad credit record.

If you still have problems to pay back, you can speak to a registered debt counsellor who will give you advice. Debt counsellors have to be registered with the National Credit Regulator (NCR). The NCR website has information about registered debt counsellor. (http://www.ncr.org.za/).

If you do not pay the creditor back as you agreed, the creditor can hand over your details to the credit bureaux and you will be blacklisted. You will then not be able to get any loan, even if you need it desperately for an emergency.

However, credit bureaux are regulated in terms of the National Credit Act. They have to register with the National Credit Regulator (NCR). The Act defines the type of information which credit bureaux may collect from consumers. They have to treat you with respect and may not collect and publicise just any information they want.

Your responsibilities

By law, you have the responsibility to pay back your loans, but you have rights. The bank, store or money lender must respect your rights. Normally the creditor would like to help you to pay your loan. The creditor will lose his/her money if you don't pay your loan at all. A creditor can take you to court, but because that is very expensive, s/he would normally not want to follow this route.

How to negotiate with confidence

You can negotiate with a bank or shop about your loan repayments.

When you negotiate with a bank or a shop, try to reach a solution that is good for you and for the bank or shop: a win-win situation.

You can try to reach a win-win solution if you do the following:

Do your homework so that you know exactly what you are talking about.
Know what you want.
Have confidence that you can reach a solution you will be satisfied with.
Be open-minded to solutions and options that the bank or store might have.
Listen to what the bank or shop say and try to understand their position.
Don't argue; work on a solution that will work for everybody.
Look the other person in the eye.
Speak with confidence.
Don't become angry.

Moneylenders and Mashonisas are not allowed to bully you to get their money back. They may not do anything illegal to get their money back. If they do, you can report them to the police.

What happens if you default on loan repayments?

The following is an example of what could happen if you default on loan repayments.

A fridge you bought on Hire Purchase will only be yours when you have paid the last instalment. Until then the fridge belongs to the shop. The shop can take it back, or repossess the fridge, when you miss paying your instalments. You will then have nothing to show for all the months of payment.

If you default, the shop where you have the account will report you to a credit bureau, and it will affect your credit record. You will have to pay the store the money you owe them, and they can get a court order to force you to pay. You will then have to pay the legal costs as well as the costs you owe the shop.

If you are employed, the shop can use the court order to instruct your employer to deduct the amount from your salary before they pay you. This amount will be deducted until all the outstanding money is paid off.

If you default on paying your account and the shop gets a court order, a R200 pair of shoes might cost you thousands of Rands after the interest and legal costs have been added.