Managing Your Debt

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It isn’t always easy to pay off bills that have grown over time — especially those that have been building up for years! But there are a few simple steps that you can take on your own that will help you through some of your financial problems that have arisen through taking on too much debt.

More about credit

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There are various forms of credit available in the form of personal loans to customers and are provided only by institutions who operate as a Registered Credit Provider in terms of the National Credit Act.
Personal Loans
What is a Personal loan? A personal loan is one of the most basic types of loans. It can be used to fund anything – home improvements, furniture, a vacation, or an unforeseen expense. Some people use a personal loan to consolidate their debt. A personal loan is a reliable option for anyone who needs access to immediate cash for personal use. There are two basic types of personal loans, secured and unsecured loans.

Secured Loan

A secured loan requires you to offer one or more of your assets as a form of collateral. If you are unable to repay the loan, the lending institution will be able to take your assets for immediate repayment. You will generally be offered a competitive interest rate if you take out a secured loan, because the risk to a lender is not as high as in the case of an unsecured loan.

Unsecured Loan

An unsecured loan does not require that you provide any form of guarantee. Consequently, you will pay more interest on an unsecured loan because the risk to the lender is greater. There are many banks and lending institutions that offer unsecured personal loans. These are specifically tailored for people who do not have any property or assets to offer as collateral.

Personal Loan Basics

You can take out a personal loan for as much as you can afford depending on the rules of the lender. Monthly repayments are usually calculated according to your loan terms and your credit score. Lenders are required to do a credit check to determine how much you can afford.

Personal Loan Lending Criteria

Lenders will ask you to provide them with your most recent payslips, your South African identity document and your latest bank statement. You may be required to take out credit life insurance on your loan in the case of retrenchment, disability or death.
Buying on Credit

Buying on credit and credit agreements

When people need to buy things like furniture, they often do not have enough money to pay cash. They can then decide to buy the things on account or on credit where they pay over a period of time or at a later date. When doing this they make debt for themselves. When people buy on credit they do this through a credit provider. Credit providers are organisations or people that lend money – such as banks and micro-lenders – or that sell goods on credit, such as shops.

Owing money and being in debt

 

Why people get into debt

People borrow money for various of reasons, including paying for regular monthly expenses – like rent and transport, emergencies – like illness or death, occasional big expenses – like school fees and car maintenance, to buy furniture or a car or other big, expensive items, to start a small business or to pay back existing debts. When a person wants to borrow money it is important for them to understand that buying on credit costs more than paying cash. The amount that a person ends up repaying includes:
  • Basic loan plus
  • Finance charges (includes interest on the loan, bank and administration charges) plus
  • Insurance charges (where this is applicable)
If a person is considering buying on credit they must find out:
  • What the total amount for the goods will be, including all the finance charges;
  • How much the deposit and monthly payments;
  • The period of time for paying off the loan.
The quicker a person pays off the debt, the lower the extra finance charges will be. The longer it takes to pay off, the more the goods end up costing. People get into difficulty paying back the money they have borrowed for all kinds of reasons. When someone does not make the monthly payment they agreed to when signing a contract, this is called defaulting. If a person is having trouble paying back their debts they can opt for help from recognised debt administration organisations and companies to plan and manage their finances better; and/or plan to pay off their debts. The consumer has the responsibility to inform the credit provider if they are unable to meet monthly repayments. The consumer has the right to go to their credit provider to make new arrangements or payments – although the credit provider does not have to agree to the consumer’s proposed arrangements
Credit Bureau

What is a Credit Bureau?

A Credit bureau is an organisation that keeps a record of your credit information. Your credit record shows how you manage your debts and is used by credit providers and moneylenders to decide if you can afford to borrow money or pay back a new loan. The National Credit Act says each credit bureau must be registered with the National Credit Regulator – who decides how your credit information can be used and who can see your credit record.

What are the responsibilities of a Credit Bureau?

 
  • To file information on your credit record after the fee is paid by the credit provider.
  • To make sure the information is correct and not keep inaccurate information.
  • To only keep information for the prescribed period and to a prescribed standard.
  • To provide a report of the information – a credit report – when required by credit providers or anyone else who has your permission.
  • Not to charge for corrections or challenges to the information by you, the consumer.
  • Not to make a negative judgement about you when they do not have any credit information.

How can your credit information be used?

  • To decide whether or not you can afford credit.
  • To investigate fraud, corruption or theft.
  • To consider you for employment in a position that requires trust, honesty and the handling of cash or finances.

What are your rights regarding a Credit Bureau?

  • To be told that a credit provider intends to report negative information on you to a credit bureau 20 working days before they do so.
  • To get a copy of your credit record from a credit bureau when you ask for it – you can get one free record each year but may be charged a small fee for further records.
  • To challenge information kept by a credit bureau if you are unhappy with it.
  • For your information to be kept confidential, and for it to be used only for the purposes that are allowed.

How do you apply for your free Credit Record?

  • Contact the credit bureau and ask them to send you your credit record.
  • You should contact Transunion on 0861 482 482 and Experian on 0861 105 665.
  • You will need to provide some personal information – such as your ID number and address.

How do you correct your Credit Record?

  • If you disagree with your credit record, you must send in the corrections within 30 days – during this time, you can get additional free copies of your record to check the corrections have been done. After this, you must pay a small fee for a copy.
  • Contact the credit bureau and ask for a dispute form. They will send you the form and a reference number.
  • Complete the forms and send them back to the bureau with a copy of your ID.
  • Include proof of the information you want changed, such as a debt clearance certificate or statement of account.
  • If they have kept a negative listing longer than they should have, insist they remove the record from their system. They have 20 working days to investigate the matter.
  • Ask for another copy of your credit report to check that the changes have been made.
* If they are unhelpful, contact the Credit Bureau Association on 011 447 7194 or email [email protected] This e-mail address is being protected from spambots. You need JavaScript enabled to view it OR the National Credit Regulator on 0860 627627 or email [email protected]
The National Credit Act (No 34 of 2005) (NCA)
The National Credit Act (No 34 of 2005) (NCA) which came into effect on 1 June 2007, recognizes that there are times when people need to borrow money in order to buy certain things. In other words, they need to get credit from credit providers. The NCA provides a framework for every type of credit transaction, including microloans, homeloans, bank overdrafts and furniture finance. The NCA impacts on consumers, credit bureaux and credit providers – ranging from microlenders to banks. The NCA sets out the rights and duties of both consumers and credit providers and includes measures that allow consumers to make informed decisions before procuring credit. It also places a responsibility on credit providers to ensure that they do not advance credit when consumers cannot afford it. The NCA also regulates the way in which credit bureaux conduct their businesses. The NCA replaced the Usury Act (which governed moneylending transactions), including the Exemption Notice to the Usury Act which governed micro-lending and the Credit Agreements Act (which governed instalment sale or hire purchase agreements). The National Credit Regulator (NCR) was established under the NCA and is responsible for enforcing the provisions of the NCA. The NCR is also responsible for educating consumers about their rights under the NCA.

Purpose of the NCA

The NCA aims to create a fair non-discriminatory environment in which people borrow and lend money while at the same time guarding against people being given a loan when they cannot afford to pay it back. The NCA refers to people who borrow as consumers and says that they should be assisted and protected in the following ways. They should be:
  • provided with information in a language they understand so that they may make informed decisions about borrowing money,
  • protected from getting into too much debt,
  • assured that credit providers follow the law when providing services to them,
  • assured that their personal information will remain private (confidential), and given help with the management of their debt.
The purposes of the NCA are: To promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect consumers, by:
  1. promoting the development of a credit market that is accessible to all South Africans.
  2. ensuring consistent treatment of different credit products and different credit providers.
  3. promoting responsibility in the credit market by:
    • encouraging responsible borrowing, avoiding over-indebtedness, and
    • discouraging reckless credit granting by credit providers and contractual default by consumers.
  4. promoting equity in the credit market by balancing the respective rights and responsibilities of credit providers and consumers;
  5. addressing and correcting imbalances in negotiating power between consumers and credit providers by-
    • providing consumers with education about credit and consumer rights.
    • providing consumers with adequate information of standardised information in order to make informed choices, and
    • providing consumers with protection from deception, and from unfair or fraudulent conduct by credit providers and credit bureaus.
  6. improving consumer credit information and reporting and regulation of credit bureaux.
  7. addressing and preventing over-indebtedness of consumers, and providing mechanisms for resolving over-indebtedness.
  8. providing for an accessible system for resolving disputes arising from credit agreements, and
  9. providing for a system of debt restructuring, enforcement and judgment, which places priority on the eventual satisfaction of all responsible consumer obligations under credit agreements.
You can get more information and downloads about the National Credit Act at www.ncr.org.za
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