January is a particularly tough month for all of us. Often businesses pay employees a bit earlier in December as they close for the holidays. This early payday might seem like a blessing at the time, but can easily turn into a stress just a few weeks later. Masses of debt get taken out over this time as festivities, sales and all-round consuming hit a peak.
How Do Consumers Become Over-Indebted?
Consumers become over-indebted by utilizing too much debt. As soon as a consumer is unable to repay their debt installments they are probably in an over-indebted state. What this means is that their income is not enough to cover all of their basic living costs, as well as their monthly debt repayments.
A consumer who is over-indebted is likely to miss or short pay certain debt repayments which weakens their credit report and has a negative effect on their credit score. When you are unable to take out any more debt due to this it is commonly known as being blacklisted.
Debt Counsellors See Huge Spikes In Inquiries In January
Many struggling consumers seek the help of debt management firms in the first few months of the year. Mostly, this is to deal with the debt hangovers that have been accrued in November and December of the year before. Credit cards, payday loans and short-term personal loans are usually the final straw that pushed consumers into an over-indebted position.
How Can A Debt Counsellor Assist An Over-Indebted Consumers?
Registered debt counsellors assist over-indebted consumers through a process called debt counselling. When a consolidation loan is no longer an option for a consumer, this is the best debt solution for them. A debt counsellor formally negotiates with the consumers credit providers to reduce monthly installments and interest rates. This is so the debt becomes more affordable for them.
A new payment plan is set up whereby the consumer will only have to make one, simple monthly payment. The debt counselling process also provides legal protection for the client. Usually, the process takes between around 60 months to clear off all the short-term debt. It is possible, however, to reduce this term by paying slightly more each month.
For more information on how debt counselling or other debt solutions work, contact Vantage Debt Management, one of South Africa’s leading debt management firms. Read more about debt counselling on our FAQ or blog page.