Tip of the day

27 November 2012

We hope your find these interesting stats and facts useful and informative and if you have any queries please contact DebtBusters on 0869 99 06 06 or have a look at our website www.debtbusters.co.za.

1. The first clearance certificate was issued on the 3rd of October 2008 and are increasing in number each month as more and more consumers see the benefits of what debt review has achieved.

2. An interest rate is best thought of as the price of money. The repo rate is currently 5% after the recent rate cut. It is the interest rate at which the SARB lends money (the wholesale price of money)

3. The prime rate is currently 8.5%. It is the interest rate banks use as a benchmark price for their products.

4. Released Affordability – as one account is paid up in Debt Review, the installment that was going to that account becomes available for use i.e. released. This necessarily increases the affordability of the consumer hence the term ‘released affordability’

5. Cascading – The use of released affordability to increase the installment(s) going to remaining account(s) under Debt Review

6. The National Credit Act is currently administered by the Minister of Trade and Industry through the Department of Trade and Industry. The Minister of Trade and Industry is…you guessed it: Ron Davies.

7. An Emolument Attachment Order (EAO) is often confused with a Garnishee Order (GO). Both are court orders but:

a. An EAO is a court order directing an EMPLOYER to deduct a certain amount of money from a SALARY to pay one or more credit providers. (salary income)

b. A GO is a court order directing SOMEONE who OWES YOU some money to pay over that money to one or more credit providers. (any income)

8. The likelihood of default is a crucial part of how a loan is priced (remember interest is the price of money). The higher the likelihood of default, the higher the price. Credit providers dealing with ‘riskier’ consumers tend to charge higher interest.

9. Household Debt is loosely defined as ‘the proportion of after tax disposable income used to repay debt’. In 2011 the household debt ratios for the UK, US and South Africa were, but make note that the UK & US have a much higher level of home ownership that we do:

146% in the United Kingdom (Office for Budget Responsibility)

119% in the United States (Stanlib)

78.5% in South Africa (NCR)

10. The South African Reserve Bank defines a household in the Household Sector of the economy as consisting of:

“…an individual or small group of individuals sharing the same living accommodation, pooling some or all of their income and wealth, while consuming goods and services collectively.”

This is the definition used when reference is made to a ‘Household Budget’.

11. Annual Inflation Rate ─ the change in the Consumer Price Index (CPI) for all items of the relevant month of the current year compared with the CPI for all items of the same month in the previous year expressed as a percentage. (source: Statistics SA)

12. Money (n) – something generally accepted as a medium of exchange, a measure of value, or a means of payment.

What is commonly used in most economies is actually Fiat Money which is money without any intrinsic value in itself i.e. a coin or note whose face value is more than the value of the metal or paper it is made of.

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