On the 9th of April, president Cyril Ramaphosa extended the 21 day South African lockdown until the end of April. Another 2 weeks of isolation for some, another 2 weeks of no income for many. Consumers with debt are now asking themselves how they are going afford living expenses and debt repayments?
Payment Holiday And Extensions Offered By The Banks
EWN reported on some of the relief measures and criteria offered by the big SA banks during the crisis.
Most banks have offered business and personal bankers the option of financial relief. This relief comes in the following forms:
- Instalment holidays, be it full or partial non-payment
- Payment arrangements
- Preferential interest rates
- The waiving of some fees
- Credit insurance claims assistance
- Offering additional credit facilities to those who may need it
Interest and fees will still accumulate on outstanding balances of these loans.
To qualify for most of these relief options your loan account needed to be up to date prior to the outbreak. This makes it difficult for those who were already struggling with debts due to other factors prior to the lockdown.
Debt Management And Consolidation Options Available During The Lockdown
Consumers battling to repay debts often look towards consolidation as a way to manage repayments. There are two types of debt consolidation options available in the market.
1) A Debt Consolidation Loan
A consolidation loan is a large personal loan given by a credit provider that is used to settle all your smaller debts.
To qualify you will need to have a high credit score, be up to date with the majority of your accounts and have the affordability to pay for the new loan.
- One loan instead of several
- Lower repayment
- Simple to manage
- Potentially high interest rate
- Extended terms
- Difficult to qualify for
- Essentially replacing debt with more debt
2) Debt Counselling
Debt counselling is a formal debt management solution. A debt counsellor will formally negotiate with all of your credit providers to reduce monthly repayments and interest rates, making your debt more affordable.
To qualify, you need to be over-indebted, meaning your income is not enough to cover debts and living expenses. You can have any credit score and can be in arrears on accounts. This is a rehabilitation solution.
- Lower, affordable payment
- One monthly repayment, instead of several
- Low interest rates (as low as 0%)
- Legal protection
- Home and car protected
- Cannot access more debt (could be seen as a positive)
- Longer repayment term