Consumers in debt are advised to be careful when using debt counseling 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 find it difficult to meet debt repayments.
The National Credit Regulator (NCR) says consumers should do their homework and find reputable practitioners.
According to the recent Debt Busters Debt Index for the second quarter of this year, there has been growing consumer demand for debt advice.
The organization says requests for debt advice have increased by 17% compared to the same period last year. He says many cite the impact of inflation, interest rate increases and reduced ability to borrow as reasons for seeking debt advice.
“The South African consumer has struggled with two things, inflation and interest rates, and both have gone up, and what we see based on the debt index, consumers are dealing with that , especially those fetching between R10,000 and R20. 000 which is the overwhelming majority of the population as far as the South African middle class is concerned, they are reacting to this by basically having to borrow to make ends meet because their wages haven’t really gone up in the last few years,” says Benay Sager.
Consumers in debt who are considering debt consolidation are advised to check whether the interest rates they are getting make financial sense, as this would mean starting new debt.
Those considering debt counseling are encouraged to do their homework to ensure they are not taken for a ride by unscrupulous practitioners.
“I always advise people to do some research on who is going to provide you with service, especially with debt counsellors; do your homework. How does debt counseling work? Does this give me a payment holiday? And then based on that research that you do, when talking to your debt counselor, see if what he’s saying goes against what you’ve been taught, because it gives you the alarm of say that this one is misleading me or just wants to book me in his book and they will take advantage of it and not me,” says NCR’s Lebogang Mosupye.
Debt Busters says the debt-to-income ratio for those in the R10,000-20,000 per month income bracket is near its highest levels on record at 127%.
The agency says this income group is feeling the twin pressures of interest rate hikes and inflation the most.