Communication and moving quickly to manage debt are key to future financial wellness
Loans are a valuable tool with which one can build a future and meet the needs of the family. As with all valuable services, problems can arise if it is not looked after and controlled. When things go wrong, the best anyone can do is speak to their lender, and if they can help, they will, says Jan Moganwa, CEO of Old Mutual Finance.
The key to solving a money problem is to seek help as soon as possible. The sooner a financial institution is informed of a problem, the sooner it can help. According to the Old Mutual Savings and Investment Monitor (OMSIM), 62% of South Africans are cutting their spending and in these troubled times it is best to examine all the options available than to live with the worry of sorting things out on your own, says Moganwa.
One of the best ways to get back on track is with debt consolidation. “What many don’t know is that debt consolidation makes debt manageable and can also save money,” says Moganwa.
- Instead of having to pay many accounts, all debts are combined into one loan.
- Instead of different interest rates for different debts, one interest rate is agreed. With interest rates at their lowest level in more than 30 years, customers will most likely get a better rate depending on their financial situation. Ideally, the goal should be to pay off your most expensive debts first.
“Debt review is another option for over-indebted customers when debt consolidation is not a practical option. If you are seriously in debt and have been defaulting on payments for a while, your credit score may already be too low for you to qualify for a debt consolidation loan. In this case, debt counseling may be the next best option. Debt review is a process where a debt counselor evaluates your outstanding debt and works with you to develop a restructured debt settlement plan.
“The debt counselor can even go so far as to renegotiate interest rates and repayment terms with your lenders to give them some breathing space to address debt. However, the debt check is a regulated process, the pros and cons of which are best discussed with a qualified specialist, ”says Moganwa.
People considering a debt check should know the following:
- Only overindebted persons are entitled to claim.
- It is only for SA citizens.
- Only people with work can qualify.
- You will not be able to enter into new loan agreements during the debt review (you cannot apply for any loans or financing) If legal proceedings are already underway to reclaim money it cannot be included in a debt review application.
- It’s not free.
- Consultants charge fees for their work and attorney’s fees must also be paid as all motions must be brought to court before a decision can be made.
- All income and debts must be disclosed to the advisor.
- Credit bureaus of the credit bureaus point out to credit providers that the providers can no longer approve loans for a person concerned.
- Repayment arrangements are made and agreed when the repayment schedule meets the lender’s terms and conditions.
- An attorney requests the court to turn the payment schedule into a court order.
- In the case of a community of property, both spouses must file a joint application for a debt review, and both are deemed to have been debts.
The benefits of a debt check are:
– Only one amount needs to be paid to the consultant each month.
– The advisor then ensures that a payment distribution point makes payments to the creditors.
– You cannot harass collectors and creditors.
– Your assets are protected from repossession by loan providers during the debt review.
“The goal of each of these actions is to help people regain control of their finances and pay off all of their debts.
“Communicating and dealing honestly with problems will provide solutions and protect your creditworthiness – something that will help build a solid future and create a legacy. As with all finance, a budget can help you avoid overspending. Budgeting properly, using credit well living can be easier and more rewarding, “adds Moganwa.
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