Struggling with debt during COVID-19 

Are you struggling with debt during COVID-19? Since South Africa announced its nationwide lock-down back in March, many have been left without jobs or receive a reduced salary and are generally in a bad financial situation. Although the government has provided some financial relief through temporary relief funds, this has proven to not be enough to help the average South African sustain their everyday lives. It may be best for you to take control of the situation yourself. Use this time to review your financial situation and reach out for help where you need it 

Many consumers find the reductions in income impacting their debt repayments.  You may be struggling to keep up with your monthly living expenses let alone keep up with your debt repayments.  Don’t ignore the situation. First and foremost, contact all your creditors and request a reduction in payments during this time. Many are also offering relief in the form of a payment holiday. Just be sure to check the impact on interest and credit record before you go this route.  

If you were struggling with debt even before the pandemic hit, you may need professional assistance.  Debt counselling may be the best option to help you through this challenging time. It will also help rebuild your finances and get you back in control.  

Why should I consider Debt Counselling?

1. Living from credit card to credit card  

Credit cards are very easy to use which us why many people spend and forget about the interest piling up with each purchase. If you do rely on your credit card every month, you may be over-indebted.  

Credit cards can also be “bad debt”. Bad debt is normally considered to be debt to maintain a certain lifestyle and this type of debt is not necessary. Bad debt can also promote bad spending behavior which means that you start spending beyond your means (what you cannot afford) 

2. Creditors hassling? 

When you start missing payments to your creditors, they will contact you to collect their money. If you cannot afford to pay them, after a while they can and will take legal action against you.  

Once legal action has been taken by your creditors, there is not much you can do to get out of the situation. Debt review is a good solution to prevent getting into a legal battle. 

3. No Emergency funds  

If you do not have an emergency fund you might be over-indebted. Having an emergency fund can help you to get out of tough financial situations without resorting to more debt. Many South Africans are struggling in the nationwide lock-down because they never built up their own emergency fund. 

An emergency fund can provide resilience I if you lose your job or receive a . To find out more on Emergency funds, click here 

4. Spending all your income 

Spending all your income as soon as you get it may mean that you are over-indebted. This means you spend your whole paycheck on debts as soon as you get it. You may have too many expenses and you need to cut down on them. If you are spending all your income on paying off your debts, you won’t have any money left over to cover your living expenses.  

What am I getting into; the pros and cons of going under debt review

The pros:

  • You only make one reduced monthly installment 

Your debt counsellor will negotiate with your creditors and lower the interest rates so that you can pay less. You will then only have to make one reduced monthly installment to your debt counselor and your debt counselor will take care of the rest for you. The only thing you need to worry about is keeping up with your monthly reduced repayment 

  • Protection of your assets  

When you fall behind on your debt repayments, creditors can take legal action and in the worst situations, reposes your assets such as your car 

When you enter under debt review, your assets are protected. Furthermore, your creditors are not allowed to contact you once you are under debt review. Your debt counselor will contact your creditors on your behalf so that you don’t have to worry. 

  • No more credit 

Once you are under debt review, you are no longer allowed to apply for more credit. This will prevent you from getting into more debt and worsening your financial situation while you are trying to become debt free. 

Once the debt review process has been completed, you will have a clean slate, this means that your credit score will be wiped clean. 

The cons:

  • Do you qualify?  

You must meet the criteria. Some of the criteria includes: debt exceeding R15 000 and you must be employed. Your debt counselor will have access to your information and can let you know if you qualify or not.  

  • Debt review has some exceptions to its cover  

Once a creditor has taken legal action against you, that debt will not be able to be included under your debt review plan. You will have to deal with that account yourself.  

  • Not a real debt counselor 

A debt counselor must be registered with the NCR before it can be considered a legitimate debt counselor. You can check yourself on the NCR website to make sure your debt counselor is legitimate. 

What next?

If you are struggling to pay off your debt during these uncertain times and you don’t know what to do, start debt review.  

You can sort out your financial situation before it’s too late and creditors turn to taking legal action against you. This way your assets and you will be protected, and you can start your journey to financial freedom.  

Know that you are not alone, and that Meerkat is here to help you, along with many other over-indebted South Africans. Contact Meerkat today to start your debt review process or if you have any questions you want answered. Meerkat is looking out for you every step of the way. So, join the Meerkat family today and start your journey to better finances.  

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