DebtBusters CEO, Ian Wason, provides YOU Magazine with expert advice on the consumer debt trap. Debt is a fact of life for many South Africans but are you paying much more than you have to? Here’s advice on the best way to borrow. – By Richard Van Rensburg You’re already deep in debt when your […]
8 February 2016
Simon Dube, an Information Technology manager for a software company in Sandton, Johannesburg, is the sole breadwinner in his family of four and earns a total monthly income of R54, 123.94. After taking into account Simon’s salary deductions, such as his medical aid, tax payment, insurance and pension fund, Simon is left with an amount of R39, 721.33 per month.
Living in an affluent area in Sandton, Simon and his family have a reputation in their neighbourhood to uphold. The area they live in comprises top Johannesburg businessmen and women and other professionals. Simon and his family constantly feel pressurised to keep up with the ‘Joneses’ and thus, always purchase the most expensive luxury items. Simon started to take out bank loans and purchasing items on credit, to purchase these items. For his 40th Birthday, Simon decided to buy another car, a BMW in order to show his neighbours that he was in financial wealth but had to take out a loan from the bank in order to finance his car.
After further deducting Simon’s monthly living expenses of R14, 441.46, he is only left with a small amount of R25, 279.87 at the end of each month to spend towards his debt. But, Simon’s total debt come to R44,680.84 every month. Thus, with only having R25, 279.87 left to spare at the end of each month, Simon has been unable to service his existing debt and has fallen into arrears on all his debt payments. To avoid losing his house, Simon took out personal loans, bank loans and used his credit card to survive. Simon eventually had borrowed more and more money from the bank, on top of his loans with rapidly increasing interest rates. He also had a lot of retail accounts as his wife and children were not aware of the financial difficulty Simon was facing, but Simon felt too embarrassed to tell his family.
Unable to sort out his finances alone, Simon decided to turn to DebtButsers, as his debt obligation of R44, 680.84, was too much and had fallen into arrears on multiple accounts.
After drawing up a new budget for Simon, DebtBusters negotiated with his credit providers in order to devise a new payment schedule for his debt repayments, as represented in the following table:
|Credit Providers||Original Annual Interest Rate||Monthly Debt Instalment Before Debt Counselling||New Agreed Annual Interest Rate||New Monthly Instalment|
|Bank loan 1||17.03%||R3,787.00||0.27%||R2,442.40|
|Bank loan 2||14.10%||R3,224.63||0.23%||R964.56|
|Bank loan 3||15.00%||R6,556.78||0.81%||R2,442.40|
|Home loan 1||8.10%||R8,297.46||7.75%||R7,497.78|
|Retail Account 1||21.00%||R1,610.79||0.34%||R46.24|
|Retail account 2||21.00%||R927.00||0.34%||R290.00|
|Retail account 3||22.65%||R640.00||0.35%||R170.00|
|Retail account 4||22.65%||R475.00||0.35%||R74.00|
|Retail account 5||15.00%||R1,289.55||0.50%||R240.00|
|Retail account 6||15.00%||R859.81||0.20%||R500.00|
|Credit card 1||18.55%||R9,242.22||0.32%||R3,360.00|
|Credit card 2||18.55%||R171.00||0.32%||R69.18|
|Personal loan 1||23.00%||R3,998.48||0.36%||R2,498.24|
Simon’s 3 biggest loans consisted of 2 vehicle loans and his home loan. DebtBusters biggest concern was to ensure that Simon was able to include these assets in the debt counselling process.
Simon’s vehicle finance companies agreed to negotiate with Debtbusters and include his vehicles in the debt counselling process. DebtBusters expert negotiator managed to reduce the interest rates on his vehicle loan from 10.25% and 11.75% per annum to 7.76% and 7.77% per annum respectively. DebtBusters negotiator managed to negotiate with Simon’s credit provider and included the home loan under debt counselling too, at a lower interest rate.
DebtBusters managed to solve all Simon’s unsecured debt under debt counselling too and in interest charges alone, DebtBusters saved Simon a total of R135,961.01 and reduced his total debt instalments from R44, 680.84 to R24, 498.87.
Once under debt counselling, Simon was able to service his debt on a monthly basis and all his unsecured debt will be settled within 60 months!