Having plied his trade in the finance industry for 20 years (during which time he worked for Accenture, Discovery, FNB and Wesbank), Alan Quinn has an intimate understanding of vehicle finance. Are you feeling overwhelmed by debt? In this instalment, he sets out a way to reduce your monthly payments, step by step.
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Every day, there are new headlines about the debt crisis in our country’s economy, many of which have either been created or exacerbated by the impacts of the Covid-19 pandemic. You may have purchased a vehicle on credit only a matter of months or years ago, but now those monthly repayments are becoming a nightmare for you.
We’ve put together 7 steps to help you tackle your debt problems. Too much debt is ruinously expensive to service and can cause tremendous stress in your life. If you’re worried about your debt levels, it is possible to take control — the most important thing is to start your road to financial recovery as soon as you possibly can. Perhaps right away.
1. Get your Credit Report
The first step you can take towards managing your debts is to understand where you are.
If you think your debts are getting on top of you, you need to gain a better understanding of your debts and how they are impacting your credit record. To help you shed light on the matter, Cars.co.za has partnered with a company called JustMoney, which will show you your credit report for free.
Why a bad Credit Score will cost you thousands every month
2. Understand your debts
Your Just Money Credit Report provides you with a couple of tools to check how well you are managing your debts:
Can you Afford your Debt?
This tool compares your monthly income to the payments you must make each month to determine if you have the income to support your debts. Your Debt Percentage is the important figure.
Where to check: Dashboard > Can You Afford Your Debt?
Are you behind on your payments?
This tool shows you all your accounts and will also tell you if you are overdue on any of the accounts.
Where to check: My Accounts > Account Summary
If your Debt Percentage is higher than 50% and you are overdue on payments for more than 1 account, you probably have a significant debt problem. This is a difficult and stressful situation and it is critical that you do not ignore this problem – if you do, it will only get worse. There are always things you can do to get on top of things. The earlier you start to take action, the more options you will have.
How to buy a car if you are blacklisted
3. Ask for Help
3.1 A Credit Coach
Cars.co.za and JustMoney provides you with access to a coach who can help you. Press on the button called “Speak to a Coach” on the JustMoney Dashboard and the Coach will call you and you can get started. The coach is a professional credit coach who has the requisite knowledge and skills to help you navigate through some of the steps I will describe below.
3.2 Your Vehicle Finance and Home Loan providers
Your most important credit is your vehicle finance and home loan. They are also, quite probably, your biggest debt repayments each month. In a worst-case scenario, the bank/s will eventually come and take (repossesses) your property and your car. Your best course of action is to call them (not wait for them to call you) and ask them for options to reduce your monthly instalments.
Circumstances have contrived to create huge debt problems for South Africans, but banks are becoming better at providing solutions to customers with debt problems. Talk to them as early as possible.
4. Shifting debt
Shifting your debts around is mainly about decreasing the cost of your debts. Many credit cards and store cards charge very high interest rates. High interest rates create high monthly repayments.
It may be worthwhile to consider a debt consolidation loan. Such a loan, if granted, will allow you to move all your debt (such as personal loans, credit cards and store cards) into one place. This means you will have one big loan at a better interest rate to cover the amount of your current debt, rather than having several little ones with high interest rates.
You will then only have to make one, collectively smaller, monthly repayment and your debt might feel easier to manage. Your JustMoney Dashboard will let you know if this is an option for you.
5. Finding extra money
To help pay off debt, it’s useful to find extra cash out of your monthly budget. Some things to consider include:
Your insurance premiums
How long has it been since you sought better insurance premiums? Making a few phone calls to get quotes from insurers could free up hundreds of Rands. It’s even simpler to request a quote online.
Switching your providers
If you’re trying to save money, it might be a good idea to regularly review the utility providers you’re using to make sure you’re getting the cheapest deal. So you might want to regularly check up on attractive deals for your phone and internet.
6. If you’re in severe debt/a debt crisis
If you are struggling to make any payments, the National Credit Act created an option called Debt Counselling. Debt counselling follows a specific legal procedure that is designed to help people who cannot meet their debt repayments. If you’re eligible, the debt counsellors negotiate with the creditors to restructure your debts. It is not easy to undergo Debt Counselling – there are some costs involved and you won’t be able to enter into new credit agreements. However, if you are in a debt crisis (and there is risk of losing your home and/or car), it can provide a better option, so that you may keep those assets.
Your JustMoney Credit Coach will be able to explain Debt Counselling to you in more detail.
7. Try to get some support
Finally, it’s important to remember you are not the only person in a financial predicament, far from it – and you don’t have to deal with debt all by yourself. The JustMoney Credit Coach is a great place to start, but you should also look for help from your support structure: family and friends who are there for you every day. Just talking about it could make a huge difference to how you feel.
