Credit can be heaven-sent for consumers when they find themselves in financial strain. It can however just as easily spiral out of control, throwing debtors into the unfortunate position of being unable to make basic payments and meeting their financial obligations. This can be a scary and confusing time, and more often than not, one filled with uncertainty of what foreboding step to take next.
We sat down with Hans Binnekade, Absa’s Head of Retail Collections, to discuss his recommendations on moving toward a place of financial stability after falling victim to a bout of bad debt.
“The first thing is to obviously inform the bank of your situation. Let them know that you are unable to make your payments. This has remained the crux of the solution,” says Binnekade.
At this point, any institution can still lend you money, but if you have a strike against your name proving that you are unable to pay your debt, and they still choose to afford you the loan, they will become accused of reckless lending. The National Credit Act is put in place to ensure that the consumer is protected in such cases.
After contacting the bank, it is key for customers to be honest with their bank on why they ended up in this situation. This is very important as the bank will then be able to advice on what the best solution is for the customer to get out of their debt difficulty. Depending on the extent of each customers financial distress, the bank can solution for you internally or refer you to a debt counsellor who will then be able to assist you in rearranging your payment agreements across all credit providers. A new contract that may be more agreeable with your circumstances, will also be drawn up. Binnekade agrees that a good credit score is the best assistance in getting your application approved during these unforeseeable circumstances.
“You’ll have to come to some kind of arrangement with the bank. There is a reasonable variety of agreements that can be drawn up. For instance, if your credit record is in good standing and you suddenly have a critical medical issue with your family, we can afford you some kind of understanding over the next few months to help rehabilitate your financial standing,” explains Binnekade.
Debt counsellors are equipped to assess the problem, investigate your financial background, ensure that you aren’t able to meet your payments, and then suggest a suitable solution for both parties.
This is no get-out-of-jail-free card, because these situations require a certain level of self-discipline too. Personal expenditures need to be re-assessed and changes need to be made. Binnekade recommends returning to basics as an ideal way forward.
“Unfortunately, when you have situations like this, you often have to look at how you are going to pull in the reigns, in terms of your expenditure. A person who is serious about rehabilitating their debt generally must give something up like their cellphone or television accounts. It is essential that lifestyle based credit is handled in an appropriate manner,” says Binnekade.
At the end of the day, an updated payment plan will benefit both the consumer and the bank. So, if you do find yourself facing a monetary dead-end, perhaps consider the assistance of a financial professional, instead of falling victim to the never-ending danger of debt.
“Ultimately, it’s not about forgiving the customer of the debt, it’s about finding a way for them to meet their obligation in an honourable way, without the bank taking too much risk.”
Interested in learning some more about relieving your debt and maintaining a healthy credit record? Take a look at a few of our other blog posts on this topic, because knowledge is definitely power.
- Know Your Affordability
- For the Record: Everything You Should Know About Your Credit Record
- What to do When You Fall Behind on Your Bond Repayments
- The Debt Counselling Journey
- Shedding Light on Debt Counselling’s Lesser-known Predecessor, Forbearance
If you have any additional queries about your credit record or debt counselling, you can phone us on 086 122 2272 or go to http://www.absa.co.za
Disclaimer: The advice contained on this blog is for general purposes only and does not take into account individual circumstances, objectives or financial needs. Accordingly, readers are advised to seek appropriate advice from licensed professionals prior to making any investment, or taking up a financial product or service.