Managing your debt with reduced earnings.

Debt is a heavy burden at the best of times, but during uncertain and difficult times like now – when we face a national crisis due to the coronavirus pandemic – debt becomes an even greater affliction.

Now is certainly not the time to ignore or hide from your debt obligations.

Even if your financial situation seems dire, there is hope and help available and many possible solutions.

It’s time to take decisive action to manage your debt.

Here are four tips you can implement today to manage your debt during the trying times we find ourselves in:

Tip-1: Don’t bury your head in the sand 

 It is now crucial to take a thorough look at your financial situation and plan for the long and difficult months ahead – especially if your income is being affected by the current national lockdown and its long-term economic implications.

Make a list of all your credit agreements – store cards, credit cards, personal loans, home loans, vehicle finance and any other debt.

For each one, write down the:

  • Amount outstanding.
  • Interest rate.
  • Monthly instalment and payment date.
  • Number of payments still due.
  • (You’ll find all this information on your monthly statements.)

Given your current financial situation and the impact of the lockdown on your income, determine which of these debt obligations you’ll be able to meet and which you’ll need assistance.

Tip-2: Communicate with credit providers

 While avoiding your creditors may seem like an easier option, not communicating your situation to your credit providers will only compound your debt problems – risking the addition of late payment penalties and hefty interest to the amounts you already owe.

As soon as you realise that you will not be able to afford your debt repayments, immediately contact your credit providers.

Your credit providers are required to assist you.

For example, you might do this by agreeing with them to set up a new payment plan or by renegotiating lower repayments (or even providing a payment holiday).

Tip-3: Focus on the positive 

It is important to focus on the positive during this time and to remain hopeful that things will improve.

One ray of hope is the cut in the interest rates.

The South African Reserve Bank (SARB) Monetary Policy Committee (MPC) has reduced the Repo Rate by 2% in the past few weeks.

The prime lending and variable mortgage interest rates are now at 7.75%.

This means that across all credit agreements on variable interest rates, South Africans will see a reduction in the interest they are paying, including from home loans and vehicle finance to credit cards and store cards.

This will provide a bit of financial relief over the coming months.

Tip-4: Tap into solutions provided

The banks have certainly indicated their willingness to assist consumers and businesses during this difficult time:

  • FNB has announced instalment cashflow relief with part or no repayments, preferential interest rates and individual bridge facilities for qualifying clients.
  • ABSA have options including reduced instalments by agreement with the bank or deferred payments for a period of three months for qualifying clients.
  • Standard Bank have halted loan repayments for three months for small businesses, students and clients with monthly income of less than R7, 500.00 per month.
  • Nedbank have support including deferred payments (or part thereof) for a suitable period, extending existing loan periods or extending additional credit to manage short term cashflow shortfalls for qualifying clients.

Contact your bank to find out what assistance might be available to you.

Don’t wait to start addressing any debt and cashflow matters you may be facing today!

If people at ooba need help with these important money conversations, there is an ICAS financial coach is ready to guide and assist them to improve their financial life – one money conversation at a time.

ICAS provides the most comprehensive range of preventative care and counseling services in the country. ICAS provides all ooba’s people with free health and well-being services 24/7.

We hope that you and the people you care for are keeping safe and well during these challenging times.