Many South Africans are struggling to meet their monthly debt obligations because of various factors, including the ever-increasing standard of living. Sadly, some don’t even know that help is within their reach. In 2007, the government introduced a programme called debt counselling to assist such consumers. What is debt counselling? Debt counselling is a debt […]
1 June 2015
“Debt Counselling changed my life” – Mr Moloyi, DebtBusters Client
At DebtBusters, the stories we hear from our clients, about how they have been able to transform their lives through DebtBusters debt counselling, is at the core of what drives us. Here is a story about Mr Moloyi, a government worker, who came to DebtBusters for help with his debt problems.
Mr Moloyi has a family of three comprising his wife and two children. He is the bread winner of the family and earns an income in addition to a housing allowance subsidy, of R18, 656.25 per month. Once his salary deductions like tax, pension and insurances are taken off, his net income is R13, 319.44 per month.
Mr Moloyi is the only member of his extended family that works so he faces a natural obligation to take care of his own family as well as his other close relatives. When Mr Moloyi’s children were still growing up he could afford to send money to his relatives as well as take care of his family as his income had a high purchasing power and his obligations were manageable. As his children became older Mr Moloyi was still earning the same income and family obligations became too much for him to manage. His children were fortunate enough to pass matric and get into university but failed to get funding, which led Mr Moloyi to approach banks to get finance for the fee deposit.
Mr Moloyi’s family expenses rose to R8, 603.00 per month. Deducting this amount from his net salary left the family with R4, 716.44 at the end of every month. The loans that Mr Moloyi took to finance his children’s education built up to an amount of R101, 256.00, with a monthly instalment of R 4, 330.00. Soonafter Mr Moloyi took out a loan for his children’s education, his brother passed away which meant Mr Moloyi had to take out a short term loan to help fund the funeral.
Mr Moloyi quickly felt the financial pressure as his expenses had risen to a level which he could not sustain. Mr Moloyi took out a short term loan to cover the shortfall in his budget at the end of the month, but at the end of the following month the same situation occurred where Mr Moloyi needed another loan to cover his expenses and pay off his existing loans. Unfortunately this time, all the short-term credit providers refused to grant him credit, as he lacked affordability.
His monthly debt instalment had risen to R8, 306.00 per month and his total debt outstanding was sitting at 128, 967.00. Mr Moloyi finally decided to take the responsible steps needed to solve his debt problem. He approached Debtbusters for help. A DebtBusters financial consultant did a full financial assessment and this is what was found:
Mr Moloyi‘s debt consisted of unsecured credit accounts only which comprised of;
- 2 Personal loan accounts
- 6 short term or micro loan accounts
- 1 credit card
Debtbusters put together the following budget for Mr Moloyi in order to assess the severity of his over-indebtedness and determine where he could reduce costs.
|Gross Salary||R15, 501.25|
|Housing Allowance||R3, 155.00|
|Total Income||R18, 656.25|
|Medical Aid||R1, 076.92|
|SADF Group Life||R255.01|
|Total Deductions||R5, 336.81|
|School Fees||R2, 400.00|
|Debt Counselling Fees||R210.33|
|Total Expenditure||R8, 813.33|
|Total amount available for debt repayments||R4, 506.11|
Debtbusters negotiated with the credit providers, after having had drafted a new budget for Mr Moloyi. The negotiations were done in order to set up a new debt repayment plan as illustrated in the table below:
|Credit Providers||Original Annual Interest Rate on loan/account||Monthly Debt Instalment Before Debt Counselling||New Agreed Annual Interest Rate on loan/account||New Monthly Instalment|
|Personal loan 1||30.1%||R1858.48||5.69%||R1, 129.99|
|Personal loan 2||32.1%||R1, 560.61||4.83%||R682.18|
|Micro loan 1||31%||R641.50||5.79%||R236.64|
|Micro loan 2||32.1%||R647.88||5.92%||R227.31|
|Micro loan 3||60%||R1, 673.20||20%||R531.29|
|Micro loan 4||32.1%||R580.28||5.92%||R155.02|
|Micro loan 5||31%||R474.02||5.79%||R93.34|
|Micro loan 6||32.1%||R230.34||5.92%||R157.91|
|Credit card 1||22.65%||R412.50||4.85%||R139.31|
|Retail account 1||15%||R227.19||3.25%||R155.02|
|Total||R8, 306.00||R3, 508.01|
A Debtbusters negotiator successfully convinced all of Mr Moloyi’s credit providers to include all of his credit agreements under debt counselling. Micro loan 3 in particular had a balance of R8, 428.00 and an instalment of R1, 673.00. After speaking to the credit provider, DebtBusters negotiator managed to reduce the interest from 60% to 20% per annum, therefore reducing the instalment from R1, 673.20 to R531.29. In total this would save Mr Moloyi’s up to R1141.91 from an instalment reduction on just one account alone!
Debtbusters managed to save Mr Moloyi a total of R98, 000.00 in interest reduction and also reduced his monthly debt instalment from R R8, 306.00 to R3, 508.01.
Mr Moloyi is now able to service his debt on a monthly basis and will be able to settle all of his unsecured debt within a period of 60 months. Mr Moloyi has been up to date with his debt repayments up to now and is happy that DebtBusters has helped him reduce the financial pressure.
“Being in debt can be so overwhelming. It is almost like a nightmare that you can’t wake up from. When I realised that I could no longer take out a loan each month to service my existing debt, I made the responsible decision to call DebtBusters. The empathy, the advice and the will to help, was what convinced me that I made the right choice to solve my debt problems. I can now sleep peacefully at night knowing that I can afford to pay for my children’s education and put food on the table. Debt Counselling has changed my life.” – Mr Moloyi, DebtBusters Client