Debt management success: Erica Manual's story

How Erica landed in debt

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 the University of Cape Town, where she studied toward her Bachelor of Commerce degree. Throughout her time at university, she 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 she continuously 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. Quickly, she realised that she was running short of cash every month. At first, she 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 that 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. Erica became unable to repay all her debt on time. She began 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.

Soon she 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. She 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. This was done 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
• 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 her 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. She took the consultants advice to undergo debt counselling in order to relieve her of the financial pressure she was under.

The specialist negotiators at DebtBusters were able to reduce her monthly debt repayments, which allowed 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.

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 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:

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.