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Debt Options During Lockdown

by | Jun 4, 2020 | Personal Finance

We are now well into our Coronavirus lockdown. Some people are staying inside, others aren’t.
Let’s be honest, lockdown for 4 people in 3 bedroom house with running water, electricity, Wi-Fi and ample food – is far easier than lockdown for 7 people in a shack or small council flat.
It is easier for those with money in their bank accounts than for those who need to wait for social grants to pay out before being able to buy groceries.

Our circumstances may differ, but most of us (besides the ridiculously rich) are worried about our finances and how, and even if, we are going to make it through the next few months.

The financial struggle is real!

Here are your debt options during lockdown:

 

CREDIT INSURANCE

If you are sitting at home, with the no work no pay scenario – and you are worried about how you are going to pay your debt during the lockdown, then you should firstly be looking at the credit insurance on all of your accounts.

In South Africa, all credit must be covered by credit insurance . There is cover which will kick in on death and disability – and cover that will kick in on unemployment and retrenchment. Policies differ. You are not going to know what cover you have, until you go through your policies or contact your creditor.

Credit insurance cover will apply to your store cards, your credit cards, personal loans, vehicle finance and home loans.

You were probably offered insurance in the fine print, signed for it – and don’t even realise that you have been paying for it all this time!

If you don’t have your paperwork on hand – contact your creditors immediately and get a copy of your policies and see if you are covered. If you are – then put in a claim, it is your right!
All your debt could be covered by credit insurance you weren’t even aware that you were paying. You won’t know unless you make the effort to find out.

ABSA’s website says: “If you become unable to earn an income between 27 March and 30 June 2020 – even if you have not been retrenched – and you have an active Credit Protection Plan, you can now submit a claim. Contract work, unpaid leave and temporary absence from work are also covered. If you qualify, you can claim for up to three months’ minimum instalments.”

Now is the time to communicate with your banks, your stores and other creditors

 

PAYMENT HOLIDAY/ PAYMENT BREAK

Another option available to individuals with debt right now what banks are calling a “payment holiday or a payment break” Not everyone qualifies for a “payment holiday/break.” Terms and conditions apply.

Unfortunately some people think that a “payment holiday” is some sort of free ride or debt write off! It isn’t! You still have to pay the money you owe.

You might be given a 3 month break from paying your home loan and your accounts (depending on your bank, your standing with your bank and their terms and conditions) but your interest will keep going.
For example, if you take a 3 month break from paying your home loan – you could end up adding years to your overall bond repayment term.

Terms and conditions differ from product to product, and from bank to bank. FNB CEO Jacques Celliers has told media that he estimates that it would take most affected clients 3-4 years to pay back the missed installments.
36 – 48 extra repayments is alot of money. You have to ask yourself whether a 3 month “payment holiday” is worth it.

Speak to your bank. You need to know exactly what you are getting yourself into.

 

DEBT COUNSELLING

If like many other South Africans you are feeling nervous about upcoming payments – and you worried about making short payments and skipping debt repayments, I would suggest that you speak to a registered debt counsellor. Debt counsellors can negotiate with your creditors about lengthening your repayment terms, lowering your interest rates and subsequently lowering your overall monthly debt instalments. That can definitely help ease the financial burden.

Your assets are safe from repossession under debt review, but you must be committed to the process. Debt counselling/ debt review and registered debt counsellors are regulated by the National Credit Regulator (NCR) It is not a fly-by-night industry or process. Sebastien Alexanderson, CEO of debt counselling firm, National Debt Advisors cautions “ Please make sure that the debt counsellor you choose is registered with the NCR, you could run into big trouble if they are not. Now is not the time to be taking chances with your money”

 

BEST ADVICE

The best piece of advice that I can offer at this time, is to become financially informed. Use your data, use your time and find out as much as you possibly can. All or none of the options above, may or may not work for you. Don’t be afraid to ask questions. Know your financial options and rights.

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