It has been an interesting few weeks for South Africa: President Cyril Ramaphosa announced a 21 day lockdown with effect from the 26th of March. This meant that non-essential businesses were to close- leaving some people unemployed, without a salary or forced to take mandatory leave with the lucky few being able to work from home.
People have a lot to worry about- but should not if they have stayed on top of their accounts and finances. Here are some tips to consider going into the coming grueling months:
Check If You Have Credit Insurance
Credit life insurance is the cover a consumer takes out in the event of their death, disability, terminal illness, unemployment or other insurable risk that is likely to impair the consumer’s ability to earn an income or pay their monthly instalments under a credit agreement.
A lot of people are unaware of this insurance on existing accounts. If you are currently without an income due to COVID- 19, make sure to call all your credit providers and check if this insurance is available to you.
If you do not have credit insurance on any of your accounts. Contact your bank and creditors in order to explore the payment schedule ahead.
Banks are rolling out solutions for their customers that include instalment cash relief, preferential interest rates for COVID- 19 interventions, no fees on relief granted, assistance with processing credit insurance as well as offering individualized bridge facilities for those who need it.
Set Up An Automated Payment
If you are in a position to pay your accounts, ensure that every account is paid on time by setting up an automated payment. This removes the temptation from spending money as it comes in. Paying accounts late can negatively impact your credit score, making it unlikely that you will get approval for bigger loans, such as a home loan or a car in the future. Moreover, a bad credit record can have a negative impact on your professional life, making it difficult for you to find a job.
Speak To Your Landlord
If you are renting and you are in a position where you cannot pay rent, have an open and honest conversation with your landlord and explain the details of your situation to explore the options ahead. This is a difficult time to get new tenants in. Landlords are human too and are also feeling the pinch of the current lockdown. So- explore what your options are and draw up an agreement that suits both parties, and includes either a payment holiday or a percentage payment on the existing rental agreement.
If an agreement can be put in place with your landlord, ensure that a contract is drawn up so that both parties abide by the agreement. If payment arrangements are not kept based on the new agreement, landlords and rental agents must report this missed payment to the relevant credit bureau and continue to follow the correct legal procedures so that the eviction process can take place after the state of disaster is lifted. Make sure that the new agreement is in line with what you can afford.
Once you have contacted your bank, landlord and creditors, you will have a pretty good idea of what awaits you in the months to come. Make a detailed list of your assets, debts, payments and living costs. Contact your provider to determine what needs to be paid now and determine what may be under threat of repossession. Keep the communication open between yourself and the creditors you have lend from. Everyone understands the difficultly COVID-19 has caused and are trying to best circumvent payment issues.
If You Need To Borrow Money, Only Use Credit Providers Registered With The NCR
The National Credit Regulator (NCR) was established as the regulator under the National Credit Act. It is responsible for the regulation of the South African credit industry; ensuring education, research, policy development, investigation of complaints, and most importantly the registration of the financial institutions we borrow from- thus, the enforcement of the Act. This Act requires the NCR to promote an accessible credit market and is responsible for the proper registration of credit providers, credit bureaus and debt counsellors.
The maximum interest rate you may be charged by a money lender is set by the National Credit Act. Always make sure that the rate you will be charged is not above what is allowed.
Do Not Over Extend Your Credit
Remember, credit costs more. Spend wisely, borrow wisely and be credit smart.
Avoid over burdening your credit card where possible and try not to stretch your credit by taking out unnecessary debt that you cannot pay back.
Consider Debt Counseling
When you apply for debt counselling, your debt counsellor approaches your various creditors to negotiate a manageable repayment plan. This process involves your debt counsellor negotiating for a cheaper interest rate and extended repayment terms, which means you pay less.
Once this agreement is in place, your only role is to ensure that payment is made monthly. However, if you are unemployed there is no guarantee that you can afford payments and the process will not work effectively.
Should you be able to provide surety that you are receiving a sufficient and steady stream of income (despite being unemployed) that is enough to cover your debt repayments, you may still qualify.
It is important to note: If you are married in community of property, your partners debt is your liability even if you had no part in accruing the debt. Both you and your partner will be liable to pay this debt. When applying for debt counselling, credit agreements from both parties must be included in the application
Protect Your Identity
Hard times make easy earnings for fraudsters. They are always looking for an opportunity to steal your information to use in order to acquire debt on your name. It is important that you protect your identity. If you become a victim of identity theft, chances are it will cause severe damage to your finances and your good name- especially if you don’t find out about it immediately. Even if you do catch on quickly, you can spend months trying to repair the damage done to your credit rating. Worst case scenario, you can even find yourself accused of a crime you did not commit because someone used your personal information to commit the crime in your name. Make sure you are on top of your credit activity and sign up to https://www.idhero.co.za/
AID Hero starts monitoring changes to your personal information within 24-48 hours, and the following changes reflect within 31 days:
Get Your Credit Report For Free
Instead of phoning around for your credit report, why not download Splendi? Splendi simplifies things by grouping all your open accounts and loans in one place and displays your risk profile and percentages of debt used and paid back. That means you will have your credit information at the tip of your fingers and can monitor your credit at any point with a simple-to-use application on your phone.
You will have access to your 24-month account history which will help you easily keep track of your credit commitments. You will also know when new accounts open in your name or are in arrears.
Knowing where you are is the first step to growing and securing a credit profile that supports your future goals and ambitions. https://www.splendi.co.za/
It is sometimes easier to get a loan than it is to pay it back. This can lead to financial strain which causes unnecessary stress and can even lead to poor physical/mental health. Make sure that you are aware of what you can afford, make the essentials your priority for the next few months and be strict on your budget. Financial institutions have a responsibility to guide their customers in this difficult time. Consumers have an equal responsibility to accept what they can afford, settle what they cannot and analyse what they really need. It is a time of thinking and in times like these, it is important to organize your priorities and ensure that you are doing right by you. Let’s spend responsibly today, so that we can borrow responsibly tomorrow.
Written by Adam Boyd