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Your Guide to Debt Management

  06/24/12 12:58, by Len, Categories: Announcements, Personal Financial Management, Debt Management, Stress

Source - Debt Management Guide by by

Many South Africans [read "People"] are falling deeper into debt especially with the economic decline, interest rate hikes and increases in petrol, electricity and food costs. Such increases have outpaced salary increases and are increasing the pressure.
No individual should be paying no more than 35% of their monthly income on repayments. However on average, the figure for repayments is sitting at 48% of one's monthly income. If you spend more than 50% per month you are in serious trouble.
Financial stress not only affects your financial well-being but also reduces productivity and may be a cause of serious stress related health problems. Creditors and debtors who pursue relentlessly can be extremely stressful not to mention harsh, and people are dealing with them directly.
We all make mistakes, and financial mistakes are definitely not exempt from human error. Main mistakes include the option of taking out a loan to pay back debt as this only increase the amount owed in the long run.
People have three to five credit cards, are only paying back the minimum and are therefore accumulating large debts. Most people do not have a budget and financial hardships are not being monitored.
There is, however, help to be found. You might have heard about debt management but you have no idea where to start or whether this is the option for you. If your monthly debt repayments exceeds your monthly income or you are left with very little monthly income after you have repaid all your debts, debt management might be for you.

Here are the ten steps to debt management:

1. Justmoney recommends using Debtbusters – get in touch with a consultant (which can be find on the Justmoney website). The Debtbusters consultant will explain the costs to you and send you an application form as well as a list of all the documents which you will need to send through in order to kick start the process.

2. When your application is completed, your debt counsellor will do a financial health check and a credit check in order to see if there are any accounts you might be unaware of or which you left out.

3. Your debt counsellor will then get in touch with all your credit providers (from home loans to store cards) and make them aware of the fact that you have applied for debt management.

4. Your budget will be assessed and you will be advised on the areas you can cut and safe so that you can pay off your debts quicker, things like groceries, insurance, bank fees, etc. If you save just 8% of your monthly outgoings every month, it will amount to a 13th cheque at the end of the year (tax free).

5. All your credit providers will then send all the information on your accounts through to the debt counsellor. Once the debt counsellor has this information, it will be added to their in-house debt management system.

6. Your consultant will then work out a budget which outlines the amount available to your credit providers, also called the rehabilitation amount. You will also be given a debt obligation list (a list with all of your credit providers). You need to read through this and sign it if you agree with the terms outlined to you.

7. Your consultant will then get in touch with your credit providers and give a proposal which outlines your agreed budget, the number of credit providers you owe and a repayment plan for each of the credit providers. You will be advised on the amount you need to pay each credit provider on a monthly basis.

8. If the credit providers accept, you will continue to make monthly payments to each creditor. If one of them decline your proposed offer, your consultant will ask the credit provider for a counter offer and discuss this with you.

9. You will be responsible for making the agreed payments each month to the credit providers for the duration of the agreement and, if you go through Debt Busters, they will review your budget as part of their service.

10. Once all your debts have been paid, if you used Debt Busters – you will be issued with a clearance certificate which will be sent to all your credit providers.

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