The credit information amnesty implemented on 1 April 2014, has left many South African consumers confused about what the credit amnesty means for them.
3 May 2019
Whether they are aware of it or not, some consumers face various emotional stages in the process of becoming over-indebted. While consumers may not experience all of these stages, which don’t always follow in chronological order, it is important to be aware of these stages in order to take action and avoid financial devastation further down the line.
There are a number of scenarios that can lead to financial trouble. This can range from unexpected expenses that are not affordable without the aid of a loan to assist, to relying on credit to cover expenses and fuel a certain lifestyle. Some consumers even face financial difficulty when they do not have adequate insurance cover in place. These events are not uncommon and can often be the prelude to becoming over-indebted if the necessary steps are not taken.
The danger of this is that the damage creeps up on you and your financial health, and before you know it, the negative emotional stages of debt start to filter in.
Stage 1: Denial
Consumers who are in denial about their debt often refuse to recognise that they need financial help. This is where consumers most struggle to reconcile their debt habits with the idea that they may be in danger of becoming over-indebted.
Consumers who are in denial typically make excuses for their inability to meet their debt obligations and bury their head in the sand. They are also inclined to write off incessant creditor calls and payment notices, and may refer to being in a “temporary tight financial spot”.
Stage 2: Stress, Anger, and Regret
Financial stress is one of the biggest contributors to certain health conditions. Experts report that those with a high debt-to-income ratio have the highest occurrences of stress-related conditions such as insomnia, anxiety, and hypertension.
In this stage consumers start to come to terms with their financial situation as the cracks start to show. This may mean that due to their over-indebtedness, they’re frequently seeking loans to make ends meet or field debt collectors.
The anger and regret then sets in when the consumer realises that they’re being denied loans as their credit profiles start reflecting their poor financial health.
The strain of meeting debt obligations coupled with affording their lifestyle is enough to send them into a downward spiral, which marks the next stage.
Stage 3: Depression
This is possibly the most significant and dangerous stage of the debt acceptance cycle. Here consumers are confronted with the reality of their financial situation and the choices that have led them to this stage.
It is indicative of hopelessness and desperation. Experts say that depression fuelled by financial anxiety is both common and crippling as consumers are unsure of who to reach out to for help. This is because of a lack of financial education, as well as a lack of awareness of the debt management solutions available to consumers.
Often at this stage the consumer spends the majority of their salary towards debt, which is demotivating, and makes it hard for the consumer to keep up with monthly living expenses.
Stage 4: Acceptance
Coming to terms with being “over-indebted” is a huge step. Often people spend the first three stages resenting this term and rejecting the help they need.
But choosing to accept your financial status can hugely impact your rehabilitation journey. This is because the most significant part of acceptance lies in a consumer’s willingness to be helped.
DebtBusters regards this as the most valuable stage, and aims to get consumers to this stage as quickly as possible so that their journey to debt freedom can begin. When the consumer is eager to work with us, we can provide them with a tailored debt solution that suits their unique financial needs.
This is the stage where a consumer has successfully completed a debt solution. The consumer feels a sense of relief and happiness as they have transitioned to being completely in control of their finances, and in a lot of cases, debt free.
For many consumers this is the goal, but it can seem unattainable without the proper help.
If you find yourself struggling through any of the five stages of debt acceptance, allow us to help you.
For a free debt assessment, help with rearranging your debts, and saving you money in the process, contact us today.