Honouring your monthly debt payments can be challenging, especially during difficult economic times. It may be that you have been retrenched, and are finding it a struggle to make ends meet. Avoiding your debt payments will not help, and, as you have borrowed money or incurred debt, you have a contractual obligation to repay the money. If you are battling to make ends meet, speak to your creditors and find out whether you can negotiate different rates with them. If this does not work, you may need to consider debt relief options.
What is debt relief?
In a nutshell, debt relief refers to a process that allows the debt of a consumer (or business) to be reorganised. This is done to provide some financial ease, where the debt is reduced or restructured. There are a number of debt relief solutions.
- Debt counselling: a debt counsellor will negotiate a new repayment plan with your credit providers.
- Debt consolidation: this is where one big loan is taken out to pay off all your other debt, negotiating a lower interest amount and limiting the monthly credit costs payable.
- Debt administration: an application is made to the court to have some of your income set aside for basic living expenses while the rest is used to pay off debt. Your total outstanding debt must be less than R50.000 for this to be an option.
- Voluntary sequestration: Sequestration is when a consumer has too much debt and there is little chance of the debt being paid back. Ultimately, the consumer is declaring bankruptcy.
- Payment holidays or extended payment terms: This is where you and the credit provider agree to postpone the payment date of the next instalment or to reduce the instalment amount and pay the loan back over a longer period.
What is the advantage of debt relief?
While borrowing money can be beneficial when done wisely, excessive borrowing can lead to crushing and overwhelming debt. The main advantage of debt relief is the potential to reduce the amount of money that you owe.
For more information regarding debt relief, speak to a consultant at One Debt today.