Indebted consumers are advised to be careful when using debt counselling or debt consolidation to avoid being taken for a ride by unscrupulous companies.
In these difficult economic conditions, marked by high inflation and rising interest rates, many have fallen on hard times and may experience difficulty in keeping up with debt repayments.
The National Credit Regulator (NCR) says consumers should do their homework and find reputable practitioners.
According to Debt Busters’ recent Debt Index for the second quarter of this year, there has been an increasing demand from consumers for debt counselling.
The organisation says debt counselling inquiries went up by 17% compared to the same period last year. It says many cite the impact of inflation, interest rate increases, and diminished ability to borrow as their reasons for seeking debt counselling.
“The South African consumer has been battling with two things, inflation and interest rates, and both have been on the rise, and what we see based on the debt index, consumers are dealing with this, particularly those taking home between R10 000 and R20 000 which is the overwhelming majority of the population when it comes to the SA middle class, those are responding to this by essentially having to borrow to make ends meet because their salaries haven’t really been increasing over the last few years,” says Benay Sager.
Indebted consumers considering debt consolidation are advised to check if the interest rates they are getting make financial sense, as this would mean starting a new debt.
Those considering debt counselling are encouraged to do their homework to ensure they are not taken for a ride by unscrupulous practitioners.
“I always advise people to do research on the people who are going to provide you with service, especially with debt counsellors; do your homework. How does debt counselling work? Does it give me a payment holiday? And then based on that research that you make, during the interview with your debt counsellor, see if what he is saying is going against what you have learnt because then that gives you an alarm to say this one is misleading me or just wants to book me into her book and they will benefit and not me,” says the NCR’s Lebogang Mosupye.
Debt Busters says the debt-to-income ratio for those in the R10 000 to R20 000 per month income band is near its highest levels recorded at 127%.
The agency says this income group is feeling the double pressure of interest rate increases and inflation the most.