Consumers encouraged to pay debts this December
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December is a critical time for consumers to make sure their payments are up to date, as millions have to stretch their money further and often end up skipping debt repayments in favour of festive-season shopping.
According to South Africa’s National Debt Counselling Association (NDCA), the economic impact of Covid-19 is likely to result in even more missed payments this year.
Pre-festive promotions such as Black Friday and Cyber Monday, as retailers tried to make up for lost lockdown sales, woukd not have helped.
“As well as retailers encouraging spending, most people are on holiday and are spending more than usual. The result is that we often see consumers picking and choosing which debts to pay over the festive period” says NDCA chairperson Benay Sager.
He said the problem with this behaviour is that it usually drives up the cost of borrowing significantly because it negatively affects people’s credit ratings.
Lenders consider consumers with poor credit scores higher risk and either won’t lend to them or charge higher interest rates to offset the risk.
Sager says that after what has been a very difficult year it is understandable that people want to reward or indulge themselves a little but warns against taking out additional debt to do so. A short-term indulgence can have long-term financial implications.
Data from NDCA shows that on average it takes up to two years for consumers to catch up payments that are missed in December. In the current economic climate, it is likely that now it will take even longer.
“While we’d advise everyone to keep up their debt payments over December, we recognise that for some this may not be achievable. If that is the case, get help from a reputable debt counsellor,” Sager says.
“Don’t delay as this could negatively affect your credit record and if you wait too long and your creditors run out of patience even debt counselling may not be an option.”
African News Agency