The second wave of the Covid-19 pandemic has hit South Africa hard. Hospitals are full, our economy is sluggish and things are quite uncertain at the start of 2021. Many consumers facing financial pressure have been seeking relief in various forms. Let’s have a look into what options the credit providers have been offering.

Lockdown Debt Relief Offered By Credit Providers

Previously we wrote about the options given to consumers by the banks regarding their debt repayments. Due to many consumers experiencing partial or full salary cuts, relief measures were introduced to ease the stress of debt repayments during this time.

Most banks offered consumers the option of debt relief in some or other way. The relief came 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
• Loan rescheduling

Costs Of Delayed Or Partial Debt Repayments

In most instances, interest and fees still accumulated along with the delayed or partial debt repayments. This means that the total cost of the credit would increase due to the relief measures offered.

Interest is usually calculated on the remaining balance of the debt. If a payment holiday option was taken, the debt balance could now be higher than it would be under the initial contract. This is due to no or lower installments being paid during the “holiday” period. The interest going forward when normal payments resume would be calculated on this higher balance.

In many cases, the duration of the loan could have also been extended due to lower payments and loan rescheduling. Consumers would then pay more fees and admin charges due to more repayments. The debt would also be settled much later than originally planned.

We have seen examples where 3 months of missed payments have resulted in 12 extra months added to the original loan period.

What Can I Do Now That The Payment Holidays Are Over?

Try to catch up on missed/short payments

If you are one of the lucky one’s whose job was unaffected or earnings have returned back to normal, you should try and catch up on any short payments.

Even though there were arrangements in place, try to catch up on the short payments to avoid any possible added interest and extra fee charges as explained above.

Seek help if you are still struggling

If you are still battling to repay the debts despite the payment holiday options, you should seek some financial assistance. If your debt repayments are too high to afford, speak to a debt counsellor.

Debt counselling assists over-indebted consumers by providing support and much needed cash-flow relief. A debt counsellor formally negotiates with your credit providers to reduce monthly payments and drop interest rates. You will only make one lower, affordable monthly payment towards all of your debt.

There are many debt counsellors in South Africa, the question is how do you choose who to contact?

• Make sure the debt counsellor is registered with the National Credit Regulator
• Ask them if they also reduce interest rates which could save you thousands of rands
• Are they charging the regulated fee amounts as stipulated by the NCR?
• Are they easy to contact and do they respond quickly to queries?
• Check their online reviews – Google, Facebook, HelloPeter etc.
• Do they use a registered Payment Distribution Agency which ensures your money is safe and secure?

Speak to a debt counsellor to get an idea of how debt counselling could help you and find out if you qualify. It’s better to make good financial decisions and get protection before it’s too late.