The coronavirus pandemic has wreaked havoc globally in a number of ways. With the virus still spreading and no vaccine in sight, it appears that it is here to stay, for the near future at least. The lockdown in South Africa has drastically affected our economy.
Even with the introduction of the lockdown levels, many businesses have been forced to close down or remain shut, which affects consumers ability to earn a living. A loss of income can have a severe impact on a household budget.
The Lockdown Has Likely Affected Your Household Budget
With less income, you have to try and make your money go further. Even necessary household expenses such as rent, water and electricity and groceries may become difficult to afford when your income is reduced.
When under financial pressure, obligations such as loan repayments, credit card debt, vehicle installments and home loan costs may be put on hold. Missing debt repayments is not advised as this could bare extra costs, affect your credit record and even result in legal action.
What Actually Happens If I Miss My Debt Repayments?
When a debt repayment is missed, your account will go into arrears. Your credit provider is likely to give you a few calls, SMS’s and emails asking why the payment was missed. Some banks have offered various forms of relief during this time. These relief options, however, often still come at some cost.
By missing a debt repayment, you naturally have to pay double in the following month. Failure to do so, will result in remaining 1 month behind on payments. Interest costs and fees can build up at this point.
After a few months of missed repayments, your account can go into a default and adverse state. Credit providers may hand you over to debt collectors or even initiate legal action. If you miss payments on your car or home, legal action could result in repossession or quick sale of your asset.
What Can I do To Get Back On Track?
The first thing that needs to be done is to draw up a proper, detailed household budget. Make a list of all of your fixed (such as rent, policies, subscriptions), variable expenses (such as utilities, groceries, transport costs etc.) and debt repayments. You also need to adjust your income if this has been affected.
If your budget is looking tight and the expenses are outweighing your income, you need to see what can be cut down or eliminated. Allocate less to variable expenses where possible and cancel unnecessary subscriptions and services.
If your expenses still outweigh your income, you may be over-indebted. Instead of looking for short term debt relief options, you probably need a permanent debt management solution, such as debt counselling.
Debt counselling assists over-indebted consumers by:
- Permanently reducing monthly debt repayments
- Consolidating debt repayments into one payment
- Reducing interest rates (to as low as 0%)
- Offering legal protection
- Clearing arrears and defaults
- Relieving stress
For more information on the above, contact Vantage for a free financial assessment.