Home South African Struggling South Africans urged to consider debt counselling

Struggling South Africans urged to consider debt counselling

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“Many South African households are in significant financial hardship and others have been struggling to make ends meet, even before the Covid-19 pandemic.”

File picture: Pexels

THE NATIONAL Credit Regulator (NCR) on Wednesday urged South African citizens who earn an income but are unable to financially sustain themselves to make use of debt counselling.

Debt counselling was introduced in the National Credit Act (NCA) in 2007 to aid consumers in debt, which is done by reconstructing their debt into manageable payments.

“Although many sectors have been allowed to get back to work, many South African households are in significant financial hardship and others have been struggling to make ends meet, even before the Covid-19 pandemic,” said advocate Kedilatile Legodi, acting manager for education and communication at the NCR.

“Whilst it may be difficult for many to confront their financial hardship, consumers who are receiving an income are encouraged to act immediately by considering debt counselling as a debt relief measure and to do so before their assets, such as houses, cars and others, are repossessed by credit providers,” said Legodi.

Debt counselling can be beneficial in reducing the likelihood of your possessions being repossessed, as well as reducing your current debt without taking on any more.

This, according to the NCR, helps consumers build a clean credit record.

Debt counselling, however, is not a free service.

“Debt counselling-related costs should be explained to consumers up front by the debt counsellor and these fees can be confirmed on the NCR website,” said Legodi.

A report released by the South African Reserve Bank in May shows that more South Africans are using their disposable income to service their debt.

“The rate of growth in bank lending to households has edged up over the past two years. Credit extension to households increased faster than disposable income in 2019, reflecting a trend change.

“The household debt-to-disposable-income ratio fell consistently between 2009 and 2018 as debt burdens were gradually worked down following a period of excess in the mid-2000s,” said the Reserve Bank.

“As a result, households are spending, on average, 9.4% of their disposable income on servicing debt – the most since 2016.”

Furthermore, the report showed that the average South African owes R19 265 on their credit card and has an average credit line of R32 973.

– African News Agency (ANA)