Debt Management


The dangers of informal lending

In recent years the number of informal lending schemes in South Africa has grown significantly as people continue to look for new ways to access more money. But is this a reliable and safe way to take out a loan?

The term ‘informal lending’ is typically used to describe lending schemes or practices that are not regulated by a formal, registered and accredited financial institution such as a bank. These schemes often involve unsecured loans and have grown in popularity because they evade common affordability checks and processes, meaning they cater to the over-indebted.

For many the attraction lies in knowing they will probably be approved for a loan despite being over-indebted.

Examples of these schemes include but are not limited to stokvels, pyramid schemes, and various investment clubs.

While some of these schemes are above board and safe there are others that are financially dangerous and here’s why:

1. You may not be able to make payments: If you are already in financial trouble and struggling to meet current debt obligations, the chances that you will be able to comfortably afford additional payments are slim. Not only will you be adding to your financial stress, but you’ll run the risk of falling behind on payments.

2. You could face expensive interest rates: Often these unsecured informal lending schemes have exorbitant interest rates that make repayments expensive. This is because the lender needs to recover the cost of the loan in a shorter period.

3. It may not be the solution you’re looking for: Struggling to meet debt repayments and feeling like you are drowning can be stressful to the point where you may seek other options such as lending informally. While this may fill a gap, it won’t enable you to better manage your debt.

Instead, you should be looking into smarter debt solutions such as debt counselling that aim to rehabilitate your finances. At DebtBusters, we specialise in helping you improve your financial situation so you’re able to enjoy a more secure financial future, with the long term goal of debt freedom and building your wealth firmly in place.

4. You may not be covered under debt counselling: Another pitfall of getting involved in informal lending is that if the lender or creditor is not accredited or registered with the National Credit Regulator, they are not protected under the National Credit Act and therefore cannot be included in the debt counselling process. This means that even if you do enlist in debt counselling, any informal lending credit agreements cannot be negotiated.

5. Unsavoury debt collection methods: Signing up for informal lending schemes opens you up to unregulated and potentially dangerous practice. This means that should you be unable to pay, you could find yourself in an unsavoury situation where the lender could threaten your safety and even your life upon non-payment.

Resorting to stop-gap measures to financially survive from month to month could be indicative of a deeper debt problem.

If you find yourself in this boat, contact DebtBusters today for a free debt assessment.


Do you have too much debt?

You notice most of your salary is going towards your debt repayments each month, you cannot afford to put money towards a savings account, you purchase your groceries with your credit card, and your credit applications are being rejected. These are all signs you’re carrying too much debt.

But how much is too much?

A method that is used to calculate the load of debt you have is the debt-to-income (DTI) ratio. This method is often used by banks when assessing your affordability when you apply for a loan.

DTI refers to the portion of your income that goes towards paying your debt. A low DTI ratio shows a good balance between debt and income.

To calculate this, add all of your various monthly debt repayment instalments together and divide them by your gross income – that is your income before any deductions such as taxes, insurance, and medical aid. Your debt repayments include your personal loans, mortgages, car finance, credit cards and student loans.

If the bank finds that more than 43% of your income is spent on covering your debt, you are not likely to get the loan. However, if it’s lower than 36%, your loan application will be approved, given that you meet other requirements.

A lower DTI demonstrates that you will be able to meet your monthly repayments.

Ways to reduce your debt

  • Sift bad debt from good debt: Student loans and mortgages can be considered good debt because they usually yield some form of return. Credit cards and store cards are not investments and they usually carry higher interest rates than other debts. Prioritise paying off your bad debt as soon as you can.
  • Get an extra income: Do not overextend yourself, but if you have extra time and an opportunity to do more work, take advantage of it. A second income will help you settle your debt faster.
  • Budget: Ensure you create an effective spending plan. Write down all your expenses and cut down on the unnecessary ones. List them according to their importance. This will help you see if there is extra cash you can stash away.
  • Save: Get into the habit of saving. Even R100 a month will go a long way. Saving will ensure you never have to borrow when you are short of cash – plus, you can use this to pay off your debt if necessary.
  • Look out for debt settlement discounts: DebtBusters’s debt settlement department can organise you a settlement discount with your creditors when you put a lump sum towards paying off your debt.
  • Apply for debt counselling: If you find that you are struggling to meet monthly repayments, consult a debt counsellor who will help you consolidate your debt without taking out an additional loan.

DebtBusters can help you restructure your debt repayments, making it easier for you to repay your loans. Contact our friendly consultants on 086 999 0606 or email to


How long does the debt counselling process take?

You may be familiar with the term “debt counselling”, but perhaps you have questions around the process and specifically how long it takes to complete.

While the general time frame is 60 months or between 3 to 5 years, it is dependent on how much debt you have and how much you can afford to repay per month. This is because each case is assessed individually and based on what you can afford.

The debt counsellor will then negotiate with your credit providers to lengthen the repayment timeframe, and to lower the interest rates and fees on your debt. Lengthening the payment terms will allow you a longer time in which to pay off your debt. This will result in lower monthly instalments. The lowering of interest rates and fees on your debt will also save you a considerable amount of money in the long run.

The main goal of debt counselling is to lessen your monthly debt instalments, making it more affordable for you to pay it every month while still allowing you to afford your living expenses.

Once you are under debt counselling, you will make one combined reduced monthly payment as opposed to paying each credit provider individually. Your debt counsellor will then get a court order or a consent order on your behalf, which will provide you with legal protection from your credit providers. This means they will no longer be authorised to call and harass you about any outstanding debt.

Another factor in the process is your commitment. What this means is that if you are not committed and diligent about making your debt repayments, you will fall further behind and essentially take far longer to reach your financial goals. Undergoing debt counselling requires you to be disciplined and cooperative in ensuring a smooth process.

But it is a small price to pay in exchange for protection from losing your assets, as well as the clearance certificate you will receive at the end of the process to certify your debt freedom.

In addition, should your financial position change while under debt counselling and you are able to pay larger amounts or a lump-sum amount, it can be arranged that you conclude the process even sooner.

Chances are you didn’t land yourself in hot water with your finances overnight, so it’s only fair that you allow the rehabilitation process to also run its course.


Debt counselling versus debt consolidation – let’s explain

If you’re struggling with managing your debt, you may be considering debt counselling or a debt consolidation loan as possible solutions to ease the financial strain. It is important to understand the difference between these two debt solutions, as although both are aimed at making managing your debt easier, they are two differently designed processes.

The five need-to-know differences are:

  1. The process:

Debt counselling allows you to consolidate your debt without having to take out an additional loan. The debt counsellor will negotiate lower interest rates and fees with credit providers on your behalf, and arrange a restructured, combined monthly repayment amount.

Debt consolidation requires you to combine all your debts by taking out a bigger loan to cover your smaller loans. The idea is to make it easier for you to manage your debt by making one repayment towards the consolidation loan each month, rather than worrying about paying various credit providers each month.

  1. Taking out credit:

Debt counselling prevents you from taking out any further credit while you are under the debt counselling process. This is for the consumers own good as the debt counsellor will restructure your repayment plan so that you have enough money to afford your living expenses each month, and taking out more credit will only hinder your financial situation further.

Debt consolidation allows you to apply for further credit. While this may seem ideal, many people are not disciplined enough to steer clear of wracking up more debt and managing it properly. This could result in a consumer becoming over indebted and needing to go under debt counselling.

  1. Protection from creditors:

Debt counselling gives you full legal protection from creditors, as outlined in section 86 of the National Credit Act. This means that all communication will go through your designated debt counsellor.

A debt consolidation loan on the other hand means that creditors are still free to contact you.

  1. Your assets:

The debt counselling process is designed to protect you from the repossession of your assets.

A debt consolidation loan will not protect your assets from repossession as part of the agreement.

  1. Qualifying criteria:

The debt counselling solution is designed for those who are gravely in arrears with their debt repayments and struggling to manage it.

For debt consolidation, the minimum criteria is a clear credit record and no existing arrears on debt repayments. Further, for debt consolidation to work, consumers must be sure that they are able to afford the monthly instalment every month, which is typically not possible for debt counselling candidates.

If you’re in over your head when it comes to managing your debt, you may need to consider contacting a trusted debt management company. At Debtbusters we will find the best debt solution for you and walk you through the process – one step at a time.


The Clearance Certificate: The ultimate goal in your Debt Counselling journey

Debt counselling is a journey which requires dedication and commitment for up to five years of your life, so we know receiving a clearance certificate at the end of the journey is a momentous occasion for both our clients and our staff who walk side by side them during this time.

DebtBusters has already issued close to one thousand clearance certificates in the first quarter of this year!

We feel great pride towards our clients for sticking to the debt counselling path and completing the process because we know the sacrifice and dedication involved. Receiving your clearance certificate not only marks the official end of your debt counselling journey, it is also a new financial start for you and your family!

What to expect:
Your clearance certificate is a letter that will be issued by DebtBusters, stating that you have settled all of your debt as per your debt restructure plan. The National Credit Act states that you are eligible to receive your clearance certificate when all of your unsecured debt is paid up, your bond/mortgage or long-term agreement payments are up to date and all of your debt counselling fees are paid up.

DebtBusters will also issue the clearance certificate to all of your credit providers and the credit bureaus. Once the credit bureaus have received your clearance certificate, they will be able to remove the debt counselling flag off your profile. They will also remove your default listings and judgements. Only your payment history will remain.

Tracking your journey
We know that our clients wait in anticipation for the day they receive their clearance certificate, so we have made it easy to track this process through our client portal Smartcents. By logging on to Smartcents, you track your individual debt counselling progress and can see how close you are to receiving your clearance certificate. You can also use this portal to log a query, view your payments and account balances.

And after?
DebtBusters is here to support you through and beyond your journey to debt freedom. We know that starting the post debt counselling chapter can be daunting, and that is why we are here to assist you beyond your debt counselling journey. We offer further financial advice and guidance to find the best financial products which will ensure you are in the best position to flourish financially.


Financial freedom is within your reach!

As we’ve just celebrated our country’s 24th year of democracy, those who have taken control of their finances and embarked on the Debt Counselling journey have even more to be proud of.

Just think how great it is going to feel to get to that point of real financial liberation! Now that is true freedom.

DebtBusters wants to take the time to celebrate all the amazing and inspirational clients who have taken the giant leap towards financial freedom and are currently taking one step closer to achieving this each day.

Let’s see how far you have come

You decided it was time to do something about your financial situation and took the admirable step to apply for debt counselling. You approached DebtBusters and together we restructured your debt repayment plan and negotiated lower interest rates and fees with your creditors. You also received legal protection from your creditors, so now you can sleep peacefully at night knowing that your assets are safe and that you don’t have to worry about those scary calls from creditors.

You are now paying a lowered monthly repayment every month which brings you closer and closer to achieving debt freedom. How awesome is that?

Let’s see what you can look forward to

You can of course look forward to receiving your clearance certificate at the end of your debt counselling journey. This is to confirm that you have settled all your debt as per your debt restructure plan. Once the Credit Bureaus receive your clearance certificate, they will remove the debt counselling flag from your profile. In addition to this they will remove all the default listings (if the account(s) was under debt counselling). The only record that will remain is your payment history. According to the Credit Act, your payment history will remain on your record for two years.

Here are some tips to help you along this journey

  1. Review and stick to your monthly budget.
  2. Make your restructured debt repayment on time each month. This is very important.
  3. Review your insurance policies and make sure you are adequately covered and paying the best rate possible.
  4. Build up an emergency savings account to help you out during those unforeseen events.
  5. If you come into a lump sum of money, put it towards settling your debt. Consider using our Debt Settlement Team – they know how to negotiate great settlement discounts, sometimes as much as 20% off!
  6. You can also get out of the debt counselling process sooner by increasing your monthly payment.


Take control of your finances with an annual check in

As the year starts coming to a close, it is a good time to reflect on the current state of your finances, as well as the financial decisions you have made this year. Setting some time aside to sit down and give yourself a financial check in will benefit you by helping you decipher if you have stuck to the goals and resolutions you made at the beginning of the year and better prepare you for conquering new financial goals in the upcoming new year.

There are a few important questions you should ask yourself when performing your financial check in:

Am I budgeting?

First of all, do you have a budget in place? And if so, have you been sticking to it on a monthly basis? Another question to ask, if you feel as though you haven’t been able to stick to your budget, is whether your budget is realistic and achievable? Do you need to change some of your spending habits in order to adhere to your budget?

When it comes to reviewing and altering your budget to suit your needs, it is important to include all of your expenses – from the big and important monthly expenses such as rent and travel expenses, to the smaller expenses such as a gym contract or any other monthly subscriptions. If you feel as though you have smaller monthly expenses that do not make much of an impact, you will be surprised what a difference they make in the whole scheme of things when you add them up. As the saying goes: “Beware of the little expenses, a small leak will sink a great ship.”

 Am I saving?

After you have set up a budget that is realistic and promotes responsible spending habits, you should have some of your monthly income left over after your living expenses. Have you been putting away any additional cash into a savings account? It is always difficult to put money away as opposed to spending it – the immediate gratification of spending always poses a dangerous temptation, but saving can be very rewarding in the long run and can help you in an emergency situation.

Downloading an app that tracks your saving can help you with feeling content about putting a portion of your salary away every month. As you see the money grow, you will feel more and more rewarded. Keeping a big goal in mind, such as saving up to buy a car, will also help you stay motivated when putting away money each month.

If you do not have money left over after your expenses, or if you are running out of money before the end of the month, it is time to realistically review your lifestyle to see if you can cut down on any of your monthly spending. Do you have any debt obligations? And is this the reason you do not have money to put away each month? This brings us to the next question.

Do I need help with my debt?

Debt is one of those things that is easy to rack up, but difficult to pay off. This can be due to the interest rates and additional fees that you commit to when you take out the debt, or from not fully grasping the long term commitment that paying off debt commands and how it can affect you in the future. For example, if you suffer a loss of income, your debt obligations will still remain. If you feel as though you are battling to keep up with your debt repayments, you can seek professional help that will lighten the burden, as well as saving you money in the long run.

Debt counselling is a process which involves negotiating with credit providers for lower interest rates and extended payment terms so that you can afford your monthly living expenses. A debt consolidation loan will help you simplify your debt repayments by consolidating them all into one loan which can also potentially save you money on interest rates and fees. You can visit to find out more about these debt solutions.

A personal financial check in will be both beneficial and productive for you. Remaining in control of your finances will help you to reach your goals, to stay prepared in case of an emergency and to keep track of your debt obligations by not allowing them to get out of hand.


Understanding Good Debt vs. Bad Debt

Debt is all the same, in the sense that we borrow money now and pay it off later. What sets good debt apart from bad debt are the positive or negative consequences that arise from the particular type of debt that is taken out. It is important to have a good understanding of what type of debt is going to benefit you and stand you in good financial stead, provided that you can realistically afford to pay it off. It is also important to understand the type of debt that should be avoided, and that may lead you into unnecessary financial distress.

What is considered good debt?

Good debt is debt that is going to have a positive impact on your financial status by increasing your net worth and/or adding value to your financial situation in the future. Some examples of good debt are as follows:

  • Taking out a bond or a home loan: borrowing money to finance a home will allow you to pay for your home over an extended period of time. If you make a wise property purchasing decision, and all goes according to plan, your home should increase in value over time. Investing in property that you can realistically afford to pay off will increase your net worth and add value to your financial situation.
  • Investing in an education; taking out a student loan is considered a wise option as you will be investing in increased skills and knowledge and provide you with future earning power. The loan can be considered an investment in yourself that will benefit you in the long run.

What is considered bad debt?

Bad debt is debt that does not increase your net worth or wealth and is used to buy non-essential goods or services that do not increase in value. This type of debt is dangerous because it is easy to get yourself into unmanageable debt by giving into the temptation of buying luxuries that you don’t really need and cannot realistically afford. Bad debt can also be any type of debt with a very high interest rate and fees. Some examples of bad debt are as follows:

  • Payday loans: these loans often have very high interest rates attached to them, meaning you will end up paying back a lot more than you borrowed. It is also very easy to get stuck in the cycle of taking out more loans to keep up with the previous ones.
  • Retail store credit cards: store credit cards can be considered bad debt if they are not used responsibly. Store cards make it easy to indulge in non-essential luxuries and can create a snowball effect.

If you are considering taking out any type of debt, it is important to complete a financial assessment to ensure that you can afford the repayments. It is also important to make sure that you do not miss monthly payments and that you are responsible and practice self-control with credit and retail store cards.


Saving in the New Year

One of the best resolutions you can make for 2017, or any year for that matter, is to manage your finances better. Not only is this a good resolution to make, but it’s not complicated. Financial freedom, stability, and  even wealth generation, can be developed over time by following a few easy maxims.

Avoid short-term debt

Debt is generally perceived as a negative thing, but this is not always the case. For example, a bond used to buy a house that appreciates in value at a higher rate than the interest charged on the bond yields a return. For those more financially astute, debt is often used to invest in stocks that yield a return much higher than the interest paid to buy them (but this should not be attempted by anyone who isn’t an expert investor!). Short-term debt, however, is bad debt. Think store cards, personal loans, and yes, even vehicle loans. At the moment you can pay up to 28% in interest on short term debt, in addition to the other fees that apply to short-term debt (e.g. initiation fees, service fees etc). In other words, debt is expensive. For short-term pleasures, you inflict upon yourself a long-term financial impediment. The moral of the story is: don’t take out short-term debt! And if you have existing short-term debt, pay it off as quickly as possible. This should be your first priority,  starting with the smallest account. Then you will free up even more cash to put toward the bigger debt, and so on. Eventually, you will realise the pleasures of having additional cash flow per month, because that money is no longer going towards debt.

Save money

Everybody knows that in principal saving money is a good thing. Yet so few people actually save! To put this into perspective, on average South Africans save less than nothing. In other words, we are a nation that is fonder of being in debt than saving. Many people fall into the trap of thinking that unless they have thousands of Rands to save, it’s not worth it. But saving anything is always better than saving nothing, because in the end those little amounts add up to a lot. The real value of saving is most vivid when compared to our previous topic: debt. Let’s put this in practical terms: i you took out a R5000 personal loan over a 12 month repayment period, you could end up making repayments of around R670 per month, eventually totaling over R8000. You received R5000; you paid R8000. Now contrast this with saving. If you put R500 into a decent money market fund, you could earn around 9% in annual interest. Therefore, after 12 months you would have accumulated about R6300. The conclusion? By saving instead of borrowing, you spent R2000 less, and received R1300 more. The sacrifice? Being diligent and delaying your gratification. It is a sacrifice that quite literally pays off.

Reduce spending

Just because you can afford something, does not mean you must buy it. This extends to our lifestyle decisions as well as to our financial planning decisions. For example, there are some people who drive to work, who could easily be taking public transport and hence saving hundreds or even thousands of Rands. Furthermore, many people are overspending on insurance policies and contracts that they could be getting at a better rate somewhere else. The internet has given us no excuse for this. A simple Google search could yield various websites that could draw up multiple quotes from different insurance providers at the click of a button. Small, seemingly insignificant steps to reduce spending all add up to huge savings. The task? Sit down and think about your budget. What do you buy, how much do you spend, and what could you cut back on? You might be surprised at how many ideas you can think of.

Make your money work for you. This is an old cliché we all know but never really heed. But the reality is, a little bit of self-discipline and wisdom makes this goal both desirable and attainable.

Regardless of whether or not your salary increases or you get a promotion, ask yourself this: will I be wealthier at the end of 2017? The answer can be yes.


New Year’s Resolutions for your Budget

The New Year is right around the corner and you are probably planning a number of resolutions that you are hoping to adhere to in 2017. The New Year is not only a time to review your personal goals, but also a fresh start for your financial goals.

January is the perfect time to review and assess your current financial plan and decipher ways in which you could improve on it in the New Year. It is a good idea to set out clear and concise financial resolutions for the New Year to ensure that your financial choices are beneficial to your future and that you don’t end up dealing with any overwhelming debt or expenses.

Here are a few financial resolutions to get you started:

Create an emergency fund

It is important to create and build an emergency fund so that you are prepared for a costly unforeseen circumstance or unplanned expenses. Your goal should be to try and save at least three months’ worth of living expenses so that your budget is not affected if an unexpected cost comes up.

Pay off your debt

If you receive any extra money in the New Year, instead of splurging on something that you don’t really need, put the money towards paying off your debt to lighten your financial load. Putting a lump sum towards your debt will lower your monthly debt repayments, freeing up some of your income to add to your savings fund or put towards other expenses.

Pack a lunch instead of eating out

You will save a considerable amount of money if you plan and pack a lunch to work a few days a week instead of eating out or grabbing a take away. Packing your own lunch is a cheaper alternative but you will also save in bank charges by not swiping your card or withdrawing money every day.

Setting realistic and concrete financial resolutions and sticking to them is sure to help you reach your bigger financial goals in the future as well as making sure that you endure the least amount of financially related stress possible.