Cape Town - The festive season hangover has started for millions of South Africans who blew their Christmas bonuses and are now in danger of falling behind on their debt repayments.
But debt counsellors and consumer forums have warned cash-strapped South Africans not to seek more credit.
Instead, draw up a budget and stick to it. And if you are really in trouble, contact a reputable and registered debt counsellor immediately, says Luke Hirst, managing director of debt-counselling company Debt Busters.
Hirst said his debt counsellors have fielded between 300 and 400 calls a day from “stressed” consumers since Christmas.
“For the first time this festive season we received calls on Christmas and New Year’s Day,” Hirst said. “People are reaching the end of their credit line even before the new year starts. They get paid in mid-December. By the time they get back to work around January 7 or 8, they have three weeks to get through until the end of the month, but no money in the bank.”
Hirst said the festive season hangover often drove people to borrow larger sums of money over longer periods of time, in some cases without considering the implications of higher interest rates.
“The ability to borrow money at a reasonable rate is getting more difficult,” he said. “People are taking any credit they get and fall deeper into the interest rate trap. The interest rate on some of these personal loans can be as much as 32percent.”
The National Credit Regulator (NCR) said credit bureaux showed that at the end of December there were 19.69 million credit-active consumers in the country.
Of these, 9.25million (47percent) had impaired records. This meant these consumers had missed three or more monthly payments, or had an adverse listing, judgment or administration order.
Over 360000 consumers have applied for debt-counselling during the past year, with a monthly average of 6500, said Louisa Hetisani, the NCR’s credit information and research manager.
More than R8billion had been distributed to credit providers through the Payment Distribution Agencies (PDAs) for consumers under debt counselling.
“Before consumers sign credit agreements, they need to understand the cost of credit and the terms and conditions of different credit agreements,” Hetisani said. “Plan to pay off as much debt as possible before taking on more credit. Most importantly, stick to and honour your credit agreement and repayments.”
The National Credit Act (NCA) aims to regulate the credit industry, curb reckless lending and ensure that consumers are protected from harmful lending business practices.
But Hetisani warned that consumers should also take responsibility for the amount of debt they take on. “After taking all your debt into account, including your home loan, car repayments, store and credit cards, make sure you can really afford to take on extra debt before you borrow more.”
* Go to www.ncr.org.za/ for a full list of registered debt counsellors or call the NCR on 0860 627 627.