Debt counselling allows consumers to take advantage of low interest rates.
Many South African consumers are wary of seeking help for their financial situation because they’re embarrassed or do not know about the options available to them. Now, with interest rates at historical lows, debt counselling may be too good an option to overlook.
“If you are struggling with your finances, you should be considering debt counselling as a way to take advantage of very low interest rates and to cut your debt burden in what is an extremely uncertain economic environment,” says Benay Sager, chief operating officer at DebtBusters, South Africa’s leading and largest debt counsellor.
He explains that the underlying principle of debt counselling is consumers only pay what they can afford towards debt repayments.
Reputable debt counsellors use an industry standard called the Debt Counselling Rule Set (DCRS) that allows them to negotiate with creditors significant interest rate reductions on consumers’ debt.
DCRS allows for reduction of monthly fees and interest rates on all loan types. DCRS is linked to the repo rate, which is currently 3.5%. This means that debt counsellors who use DCRS are able to secure interest rates on bonds and vehicle finance as low as the repo rate plus 2% - or 5.5% - to ensure consumers are able to afford the repayments.
On top of that – for unsecured lending such as personal loans and credit cards, which is where most South Africans feel the burden of debt - DCRS allows for renegotiation of the interest rate as close to zero percent as possible.
“Personal loans sometimes have annual interest rates as high as 23%. Store cards and credit cards also typically have comparatively high interest charges. In some instances, to make the repayment plan affordable for a consumer the rates on these debts could be renegotiated down to 0%,” says Sager.
He says that in the current economic environment this could provide massive relief for many consumers who are struggling to make ends meet.
“The reality is that if you’re feeling the burden of debt, talking to your debt counsellor is the responsible thing to do, particularly in an economy that was already in difficulty before lockdown and will now struggle to recover even to pre-lockdown levels. The earlier you act, the better your chances of getting back on a sound financial footing and not putting everything you’ve worked for at risk.”
South Africa has a world-class, regulated debt counselling sector and it is working well. DebtBusters uses the DCRS system and has helped hundreds of thousands of consumers since the system’s inception in the early 2010s.
If you’re not sure about your situation, this online survey will give you an indication whether you should seek help https://www.debtbusters.co.za/tools-and-advice/self-analysis-test/
More information about debt counselling and the process is available here: https://www.debtbusters.co.za/debt-solutions/debt-counselling/.