The credit information amnesty implemented on 1 April 2014, has left many South African consumers confused about what the credit amnesty means for them.
8 February 2016
Erica Manuel is a young and aspiring individual who has been employed by a reputable insurance company in Cape Town. Having come from a stable financial background, Erica has never been in the situation where she was in dire need of money. Originally from Nelspruit, Erica attended UCT and studied toward her Bachelor of Commerce degree. Throughout her time at university, Erica occasionally indulged in purchases which were rather expensive. When she overspent her monthly budget, which was funded every month by her father, she would often scrape through the month, knowing that the following month, she would be topped up with money again.
Unfortunately, Erica’s spending habits did not change when she started working and constantly indulged on expensive and luxury items. Her spending behaviour worsened. Now that she was employed, Erica overspent more than she used to because she had more money every month, purchasing expensive items at retail stores on credit.
Erica realised that she was running short of cash every month and at first, started taking out more and more loans from her bank to help pay back all the retail stores and loans every month. What Erica did not realise is loans and retail accounts carry high-interest rates and along with all her other loans, it would become too much to handle. Indeed, this is what happened and Erica became unable to repay all her debt on time because she could not afford to any longer.
Erica started receiving phone calls from her credit providers because she started defaulting on credit agreements. She was being placed under more and more pressure each month to fulfil her debt repayments. Erica felt that she was unable to continue because she was left with no money at the end of the month. This is when she decided to look for help and the first place she did was on the internet.
Erica came across DebtBusters, and within speaking to the expert financial consultant at the company, she was reassured that debt counselling would be the best way to regain control of her finances. The consultant investigated Erica’s current financial situation, by performing a financial health assessment in order to gain a better understanding of her financial situation. After the assessment was complete, it was clear to see that Erica did not have enough money in the month to repay all her debt.
Below is a simple breakdown of Erica’s financial situation:
Erica had 8 accounts of which 3 were in arrears. Erica had no vehicle account or home loan, only personal loans or unsecured debt. Traditionally, unsecured debt carries very high-interest rates, which meant that Erica needed to repay much more than what she originally borrowed from her creditors.
The DebtBusters consultant advised Erica that if she did not change her current spending habits, she would be in further financial trouble the following month and her credit score would decline. With this advice, Erica took the consultants advice to undergo debt counselling in order to relieve her of the financial pressure she was under. The consultant was able to indicate that the specialist negotiators at DebtBusters would be able to reduce her monthly debt repayments, which allow Erica to have spare money left over at the end of every month.
Below was Erica’s budget before debt counselling, which included all expenses she used for entertainment and unnecessary expenditure.
|Gross Salary||R 9,790.00|
|TOTAL INCOME||R 8,647.75|
|TOTAL DEDUCTIONS:||R 1,142.25|
|TOTAL EXPENSES||R 5,847.75|
|TOTAL AMOUNT AVAILABLE FOR DEBT REPAYMENTS||R 3,804.04|
Erica only had R3,804.04 left every month toward her debt repayments. However, her total debt amounted to R 6,604.04. Erica needed help fast.
On the 12 October 2013, Erica joined DebtBusters. Then, the negotiator at DebtBusters communicated with all of Erica’s credit providers so that all her monthly debt repayments could be lowered to an amount which she could comfortably afford and that would suit her budget. Further, the negotiator also lowered all Erica’s interest rates on her accounts to further assist in making her debt repayments more affordable in the long term.
Below is the outcome of the negotiations process with all the credit providers:
|Credit Providers||Original Annual Interest rate||Monthly Debt instalment before debt review||New agreed annual Interest Rate||New Monthly Instalment|
|Bank loan 1||31.00%||R1,790.91||2.58%||R917.28|
|Personal loan 1||32.60%||R1,259.46||1.91%||R553.14|
|Personal loan 2||32.10%||R597.32||1.57%||R260.80|
|Personal loan 3||31.00%||R699.11||2.58%||R307.59|
|Credit card 1||22.65%||R257.20||2.19%||R99.09|
|Retail account 1||22.65%||R743.00||2.19%||R173.18|
|Retail account 2||26.00%||R605.00||2.35%||R97.72|
|Retail account 3||22.65%||R652.04||2.19%||R135.84|
DebtBusters managed to lower her debt repayments from R6,604.04 every month to R2,544.64. Also, throughout her debt counselling process, DebtBusters will end up saving her R90,873.82 in interest and fees.
Erica is now comfortably paying all her accounts, on time, and is stress-free.