Debt Counselling Case Study

Thabo has a home loan, two credit cards and a few other accounts. Due to unforeseen circumstances he missed 2 months of his car payment. Thabo has been receiving numerous phone calls, emails and SMS’s from MFC informing him that his vehicle is at risk of being repossessed.

The situation has put Thabo under a lot of stress. A friend recommended him to approach Vantage to see how they can assist.

A consultant conducted an assessment and got the following information from Thabo:

Thabo’s net income: R33 250

Thabo’s total monthly living expenses: R16 450

Thabo’s current total monthly debt repayment: R25 442

Thabo’s current debt profile is shown below:

Credit Provider Account Type Current Balance Current Instalment Remaining Term (Months) Current Interest Rate
SA Home Loans Home Loan R675 792 R7 424 174 9.8%
MFC Vehicle Vehicle Finance R73 556 R3 200 26 10%
Standard Bank Mastercard Credit Card R64 802 R2 330 37 17.6%
FNB Credit Card Credit Card R150 321 R7 821 24 18.6%
Woolworths Store Card R3 248 R417 9 23%
FNB Overdraft Overdraft R85 000 R4 250 22 18%

 

Currently, Thabo is the breadwinner in the household, as his wife is not working. After all of these debts have been paid, they are left with only R7 808 each month for their basic living expenses.

The problem is that Thabo’s rent is already R8 500 per month. On top of this, the family needs groceries, water and electricity and his kids’ school fees need to be paid. This forces Thabo to use his credit cards and his overdraft at the end of every month, just before payday. This is known as a debt cycle.

After speaking to Vantage, it was established that Thabo is clearly over-indebted. He has got a monthly shortfall of R8 642 (Income minus Living Expenses minus Debt Repayments). His income is not enough to cover the living expenses and the debt repayments. He needs urgent help before his car and home get repossessed and sold. Due to his financial situation, Thabo desperately needs a solution.

Debt counselling will assist Thabo with immediate relief by reducing his monthly debt repayments. Based on Vantage’s calculations, his new monthly repayment will be R15 900, saving him R9 542 each month.

After his salary gets paid and he pays his new debt counselling repayment of R15 900, he will be left with R17 350 for his living expenses. Thabo no longer receives calls and SMS’s from his credit providers and his house and car are safe. He can now afford all the things that matter and no longer needs to be stressed at the end of the month. He may even have some extra cash leftover to save for a rainy day.

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