debt management options

Banks and credit companies are offering all kinds of assistance and payment holidays to assist their customers during the pandemic. UIF is offering companies a percentage of their wage bill as part of a stimulus to help companies keep their employees during these difficult times. Interest free or very low interest loans are being offered to qualifying companies to help them stay in business. It is important to note that any employee only qualifies for a TERS claim from UIF if they do freelance work or derive an income outside of their employment. You must work for a single employer for more than 24 hours a month to qualify. If you derive an income from a side hustle or a night time job, you do not qualify for a TERS payout from UIF.

Reducing your debt burden

If you get a full salary from your employer during lockdown and are working from home, this is the ideal time to reduce your liabilities.
You will have noticed how much less you are spending under lockdown.

Put as much money into your highest interest debt like overdrafts, credit cards or store cards to reduce your liability.
Take advantage of the reduced interest rates from your bankers. Eg. FNB is offering prime rate to customers in good standing.
You will be travelling less, reduce your debt with your travel savings.
If you are renting, ask your landlord for a reduction in the rent for a few months. Most are agreeable to this. In every landlords’ eyes, “A good tenant is a paying tenant”
Check to see if you have credit insurance on any of your credit agreements. Your invoice/statement should indicate an insurance payment.
Ask for relief from anyone that you pay money to. You will be amazed at how forthcoming people are.

The bottom line is that we all need each other during a time like this. It is better for me to offer some sort of relief and keep you paying something than to pressure you into paying the full amount. This strategy may result in you going for debt review or business rescue or some other form of protection from creditors.
Some creditors will defer payments for a few months or extend the contract term. For Eg. They may say, “don’t pay us for the next 6 months” but we will extend your contract period for 6 months. This is a great option if the interest is also suspended for those 6 months. If not you will be paying 6 months of interest on the total amount owing which can be damaging.

Handling your debt

If for any reason, you feel you are simply unable to handle the debt burden you are under, don’t wait for creditors to take you to court. Leaving it this late will surely result in you incurring costs and you getting a judgement against you.

The better route to go if you are simply unable to manage, is to apply for debt relief and debt counselling. The debt management company will take a look at all of your debt, sort it according to urgency and then by interest rate. Once this is done, they will try to consolidate all of your debt into a single loan amount, allowing you to pay a single loan. This saves on administration costs, consolidates your debt and prevents your creditors from pursuing legal action against you. Effectively, the debt consellors negotiate a settlement with the creditor, pay off the amount from the single loan and free you from that creditor.

In some cases the length of time that you have to repay the loan is extended to a make it affordable and within your budget.
It can never be under estimated just how damaging it is to your self confidence, your demeanour, your very being, when you are under tremendous debt pressure.

Other options which should only be used in absolutely desperate circumstances are the surrendering of life insurance policies that have a value. Stopping any savings and redirecting to lessen your debt burden can also be considered but should also only be in desperate times. Consult a financial advisor or see the HR department about what options are available to you but always resist reducing your retirement savings. There are some funds that allow you to take a loan against your pension fund but would depend on the rules of the scheme.