Jeremy Michaels (not his real name) was R100 000 in debt and out of options, when he responded to an advertisement offering relief through debt counselling. Three years later he is a changed man - debt free and confident he will remain so.
“Getting into debt can happen so quickly. Your circumstances change and you start living on loans, picking up one loan, and then another and eventually your salary isn’t enough, so you can’t pay it off.
“I am a spender. I always have been. I like quality things for myself. I don’t care if something is more expensive; if it’s nice, I want it! My wife is different, she’s a gambler. I can’t spend money that way, R1000 gone in two or three minutes. I want to see a nice pair of shoes for my money.
“I’m 47 years old and have worked in sales for this company for 20 years, with one break in service for a year. My wife and I have been married for 22 years and have one son, who’s just turned 21. My wife also works, but for a long time she didn’t, and I was the only one earning. We both got into debt; we weren’t disciplined about spending.
“I never worried about money while I was working but, in 2007, I decided to go on my own go big, you know? I was already in debt; I had a bond and accounts that had to be paid - store accounts for clothing and furniture - the usual things. That was my big mistake: I should have had more capital. You think the work is just going to keep coming in.
“I was in trouble in my second month already. I was very worried about my name. I had had a very good name with all my creditors and got regular credit increases. I had a bond, and I was on my third car through the bank, and I had always paid back more than I needed to. It’s important to have a good name. Without that, you struggle. Suddenly, I couldn’t get money anywhere. So I had to manage on what I had, which wasn’t much. I lost my house eventually.
“I was on my own for a year and that year changed my whole life. It wasn’t nice, but I am thankful for it. If I’d had more capital, I could have made it, but I knew it was not working and I had to get a job again. I didn’t want to apply for my old job - I was bit embarrassed - so I put my name out through an agency and my old company heard about it. Fortunately, I had been a good worker, a hard worker, so they offered me my job back. So here I am.
“I didn’t apply for debt counselling; I just answered an ad that appeared in my email, and they responded immediately. After that, it was mostly done by email. I never met anyone. I told them what I could about my debts off the top of my head, but they were also able to check - I think through my credit record. They could say ‘We see there’s a Nedbank loan there’s Wonga ’ and they could give me the total that was outstanding.
“When they had added it together, they said I must pay R3000 a month, but then Nedbank said they wouldn’t accept what was offered; I think it was with the attorneys already. So, the amount I had to pay dropped to R2500 so I could pay Nedbank separately.
“It is scary to hand yourself over, but it was also a huge relief. And there was nothing else I could do - I was under a lot of pressure. Not only from people phoning and asking, but also because I didn’t have money to put food on the table at the end of the month. You think, ‘What am I working for? How did I get into this so quickly? Must I get a second job or a better job?’ When they told me I would have to pay R2500, my first thought was that I’d have cash left over for the first time. It was such a weight off my mind.
“They did all the negotiations with the creditors. They did everything; I was really impressed. They were constantly in contact with me to tell me what was going on, or to tell me what the next step would be. Sometimes it was almost too much, but better that way.
“This went on right through the three years it took to pay off my debts. Each month I got a statement saying who had been paid what and what the administration fee was. The fee was not much for what they did. I could check the balances, and they were always 100% accurate. When a debt was paid up, they’d tell me and arrange a clearance certificate. I even got some money back from two of the banks when the whole process was finished.
“Once you are under this process, nobody can touch you. I was told at the beginning, ‘Once you are in debt counselling, no one will be able to call you’. And that’s the way it worked. The only one that ever called me was Nedbank when they didn’t agree with the process.
“I have no criticisms at all. I’m happy that I’m out of this thing now, and I’m happy with the way it was handled. I’ve never come across service like that.
“I’ve learnt from all this: Do not waste money! Your circumstances can change. I took my wife and son to Spur the other day; we had forgotten what it looks like. I told them ‘just this once’. But we can go every few months just not every week like we used to. We don’t go to movies every week either like we used to.
“Everything that comes in now, I have to watch. You should have a budget based on your salary. I record on my phone everything that’s going out or coming in, my savings and my cash. I’m waiting for a financial adviser to see me about opening a unit trust investment account. If you think about it, you spend R500 at Spur and R100 here and R300 there; you can rather invest it. I am already putting R200 into a retirement fund. I have a good pension here, but I must do something to supplement it. I have life assurance now too. My wife has been crying for DStv, but I said no. I had to - I’m too scared.
“I don’t miss my spending days. I hated being in a situation I could do nothing about, feeling helpless.
“Now I have peace of mind. You can do without so many things. Once in a while you can reward yourself - but no, I don’t miss those days.”
CAN YOU AFFORD IT?
Of course there are costs related to debt counselling, but the fee structure is carefully planned to be affordable for the client, says Benay Sager, chief operations officer at DebtBusters, the debt counselling firm that helped Jeremy Michaels change his life.
“Firstly, the debt counsellor will negotiate lower interest rates and fees with credit providers to ensure that the consumer can now afford their monthly instalments and the credit providers still get paid back the money they lent to the consumer,” he says.
As well as taking on all the communication with creditors and organising a lower, consolidated repayment amount to be distributed to them each month, the company also provides legal protection for the consumer to ensure that creditors cannot take legal action against them.
“It is important to note that debt counsellors factor their fees into the consumer’s new budget, so they will never be charged what they cannot afford,” says Sager. “Because interest rates and fees on the debt are reduced, consumers still end up saving a significant amount of money in the long run, even when the debt counsellor’s fees are taken into account.”