Make the right financial decisions to avoid debt crisis

A lot of the time, you tend to make a decision based on how you feel before you have gathered any information that will help you to make a calculated choice. Or you may base our financial decisions off of what our mentors have done or what you think you are supposed to do. These are a few ways you make financial decisions which can prove to be costly or profitable. The most important thing to remember is there is no one certain way to make a decision. It should all be based on your desired destination and you should seek out as much information as possible. The more you learn about the different parts of decision making the easier it will be to make financial decisions that will be the most beneficial. The ways you make financial decisions will vary from time to time and some are least likely to get you where you want to be than others. For instance, when you view intuition in making your decision you are pretty much throwing your chances to the wind and choosing to let the outcome be out of your control. I understand the term “go with your gut feeling”, and have even thought it in the past, however this isn’t a decision making option I would recommend. It doesn’t allow you to educate yourself on the outcome and is a lazy way of making a decision due to the lack of effort exerted. Another way you make financial decisions is through patterns. You continue to make financial decisions the way you always have. The way you were taught by our parents or through habit. This way only leads you in a circle and keeps you from ever seeing change or advancement. Finally, there’s the logical way you make financial decisions. This is where you weigh our options, view the pros and cons and make sure that you are going to get our desired result. This is the way you want to train our minds to make financial decisions. It is an educated approach that allows you to almost determine the outcome. Smart decision-making is all about making good judgments. If ever you are at a point of not knowing why you are about to make a decision be sure to take a minute to stop and evaluate it. Analyze the type of decision it is and then choose to logically make the decision by assessing the pros and cons and selecting the answer that gives you long term success. This should open up some thought and keep you from feeling the effects that will come if you simply choose to emotionally decide. For some the smart decision-making process will cause feelings of fear or uncertainty. Due to the old conditioning and poor decision habits that you are you’d to taking, a step onto new ground may seem daunting and may cause some concern. The more personal the decision the harder it may become to make a wise decision over one that will bring some kind of instant happiness. In these types of situations you tend to slip out of objective thinking which keeps you from thinking clearly. Making the right financial choices today can keep you from burning you fingers in the future. Remember that debt counselling and debt review can assist you in lowering all your monthly debt obligations so that you better the quality of living. You will stop all legal action against you and prevent property and vehicle repossession immediately.

Which credit agreements fall under debt review

You may be aware that all creditors fall under the National Credit Act (NCA), but did you know that if you deal with a pawnbroker you are also protected? Pawnbrokers fall under the NCA because they are in the business of providing credit, Peter Setou, the senior manager of education and strategy at the National Credit Regulator (NCR), says. "Pawnbrokers that have at least 100 agreements on their books, or a total outstanding debt of more than R500 000 owed to them under pawn agreements, must register with the NCR," Setou says. However, those that do not meet the conditions for registering with the NCR still fall under the Act, and their clients also enjoy its protection. Setou says although pawnbrokers are exempt from having to conduct an affordability assessment before they grant you a loan, they must comply with a number of other NCA requirements, such as:
The credit agreement must state an end date;

The safekeeping of property given to the pawnbroker is the pawnbroker's responsibility;

The pawnbroker must return your property once you have met your obligations;

If the pawnbroker fails to return your property on the termination of the agreement, you can lodge a complaint with the NCR or the Provincial Consumer Affairs Office;

If your property is lost due to circumstances beyond the control of the pawnbroker, such as in a fire, you are entitled to be refunded an amount equal to its fair market value less any outstanding amount you owe;

If the failure to return your property is due to a reason within the control of the pawnbroker (for example, the item was sold), you are entitled to double its fair market value less any outstanding amount you owe; and

How long must I wait before applying for debt review?

We often get the following scenarios that can have the result that debt counselling and debt review actually outs you off much worse than your current situation. What happens if consumers wait too long after they realise that they are in financial distress before they apply for debt counselling and debt review. The answer is very simple yet there is a complex reasoning behind the answer. If you leave your accounts to get so far in arrears and then apply for debt counselling, Help with debt, debt counsellors cannot guarantee that we will be able to lower that specific repayment. The reason being is that your creditors are forced to first bring your arrears amount up to date before they can start paying off your capital. Furthermore, the National Credit Act only allows consumers under debt counselling and debt review to extend certain agreements for a maximum period. This is also dependant on the age of the agreement. For instance, if you have only a few months left on your original contract term but you are in arrears with almost half the agreed amount, the period cannot be extended so much that you will benefit from debt counselling. I had a new client today that was more that 22 months in arrears with a finance agreement that only had 8 months (original) contract term left. The result was that the restructured payment for that account was almost R200 more than his original instalment. This brings me to my next example. Normally if I get clients that are not in arrears with accounts but foresee a difficult financial future, I am almost guaranteed to more than halve their payments. Bottom line. The sooner you make a plan to sort out a dismal financial situation, the better. Banks and other credit providers respect clients that are precaution and make arrangements through debt counselling and debt review sooner than later. If the credit providers have to phone trace and keep on asking you for money they will view you as a risk. If you feel that you need some more information on the process of debt counselling and debt review, please do not hesitate to contact us. Help with debt!

Skuldberading Mpumalanga

Debt review and debt counselling Mpumalanga Help with debt assist clients in Bronkhortspuit, Middelburg (Mpumalanga), Witbank, Pelgrimsrus, Lydenburg, Burgersfort, Belfast, Nelspruit, Ermelo, Evander, Trichard, Kinross, Amersfoort, Waterval Boven, Waterval Onder, Machado Dorp, Graskop, Sabie, Hazyviewand, Bosbokrand, Sabi Sands, Klaserie, Hoedspruit, Marloth Park, Skukuza, Steelpoort and the rest of South Africa Before a debt management company such as Help with Debt can assist any client with their debt problems, the process of debt review needs to be undertaken. Debt review assists the debt management company in identifying the debt problem at hand, and finding the suitable solution. Help with Debt performs a thorough debt review process on all their clients, ensuring that all needs are identified, and an accurate solution created. Help with Debt offers the following to their clients who are searching to undergo debt review: � No upfront fees � No additional loans � One very affordable monthly payment to creditors � No interviews unless you want to have a free consultation Contact Help with Debt today, and let them assist you through their debt review services. Contact Details: Contact Number: 073 053 7756 Fax Number: 086 519 4004 Email: info@helpwithdebt.co.za Website:http://www.helpwithdebt.co.za

Savings

If you believe that every cent counts, First National Bank (FNB) has come up with a way for you to start saving your small change with its new savings feature, Bank Your Change.
Bank Your Change works by allowing you to save your "left over" cents each time you use your FNB cheque or debit card to pay for a transaction. French says FNB came up with the concept as a means to start reviving a savings culture in South Africa.
In three months, more than 12 000 customers have signed up for Bank Your Change, which is available on FNB's personal cheque accounts.
Shane French, FNB's head of consumer products, says: "The take up of Bank Your Change shows that there is appetite among South African households to save, provided there is a cheap and easily accessible tool to do so."
As a percentage of disposable income, household savings has fallen from around 5.4 percent in the 1980s to a negative 0.1 percent in 2009. This means that the average South African is not saving any money at all.
How it works
Whenever you make a purchase using your FNB cheque or debit card, the amount is rounded up to the next rand. The difference between the purchase price and the rounded-up amount is then transferred into a linked "savings pocket", at no additional cost to you.
For example, if you buy something for R32.50, the amount will be rounded up to R33 and 50 cents will be transferred.
If you want to save more, you can select an additional amount of R2, R5, R10 or R20 to be deposited in the savings pocket.
Transfers between your cheque account and the savings pocket are free, and you earn interest on your savings on a tiered basis.
http://www.helpwithdebt.co.za
If you believe that every cent counts, First National Bank (FNB) has come up with a way for you to start saving your small change with its new savings feature, Bank Your Change. Bank Your Change works by allowing you to save your "left over" cents each time you use your FNB cheque or debit card to pay for a transaction. French says FNB came up with the concept as a means to start reviving a savings culture in South Africa. In three months, more than 12 000 customers have signed up for Bank Your Change, which is available on FNB's personal cheque accounts. Shane French, FNB's head of consumer products, says: "The take up of Bank Your Change shows that there is appetite among South African households to save, provided there is a cheap and easily accessible tool to do so." As a percentage of disposable income, household savings has fallen from around 5.4 percent in the 1980s to a negative 0.1 percent in 2009. This means that the average South African is not saving any money at all. How it worksWhenever you make a purchase using your FNB cheque or debit card, the amount is rounded up to the next rand. The difference between the purchase price and the rounded-up amount is then transferred into a linked "savings pocket", at no additional cost to you. For example, if you buy something for R32.50, the amount will be rounded up to R33 and 50 cents will be transferred. If you want to save more, you can select an additional amount of R2, R5, R10 or R20 to be deposited in the savings pocket. Transfers between your cheque account and the savings pocket are free, and you earn interest on your savings on a tiered basis. http://www.helpwithdebt.co.za

Skuldberading Limpopo

Die nuwe Nasionale Kredietwet (No.34 van 2005) het op 1 Junie 2007 in werking getree. Die Wet stel nuwe vereistes aan kredietverskaffers, wat beslis 'n uitwerking op kredietverlening deur NWK gaan hê. In hierdie artikel word gepoog om te verduidelik hoe hierdie wetgewing die NWK-klant raak. Die Nasionale Kredietwet vervang die Wet op Kredietooreenkomste en die Woekerwet.Die hoofdoelstellings van die Wet is die volgende:

Verhoed roekelose kredietverlening;

voorkom oormatige skuldlas by landsburgers;

verseker volle openbaarmaking van inligting aan kredietopnemers;

bied beskerming aan kredietopnemers teen onregverdige optrede of wanpraktyke deur kredietgewers en kredietburo's;

verskaf riglyne met die daarstelling van alternatiewe vir dispuutoplossings; en

stel prosedures daar om skuldhersiening en skuldherstrukturering te fasiliteer.Watter transaksies val onder die Wet?Bykans alle armlengte-krediettransaksies val onder die Wet, insluitend huurkope. Sommige van die belangriker uitsonderings is die volgende:

Insidentele krediet ('n voorbeeld hiervan is 'n maandrekening waar die rekening dertig dae na staat betaal word sonder dat rente gehef word).

Skuld wat ontstaan as gevolg van 'n tjek wat vir betaling aangebied en deur die bank gedishonoreer word.Wie val onder die Wet?Alle entiteite wat krediet opneem val onder die Wet, met die uitsluiting van:

beslote korporasies;

trusts met drie of meer trustees;

maatskappye;

vennootskappe; en

verenigings.'n Voorwaarde is egter dat die voormelde entiteite (in die Wet word verwys na regspersone) 'n batewaarde of omset van R1 000 000 of meer het. Privaatpersone val dus almal onder die werking van die Wet. Indien die regspersone 'n batewaarde of omset van minder as R1 000 000 het, maar 'n kredietooreenkoms aangaan van R250 000 of meer, val die transaksie ook buite die Wet. Indien 'n persoon borg teken vir 'n kredietopnemer wat onder die Wet val, word die borg hanteer asof hy die hoofskuldenaar is en val hy ook onder die Wet. Die borg se finansiële posisie moet dus ook in terme van die Wet geëvalueer word.Kredietooreenkomste Die ooreenkoms tussen die partye is onderworpe aan streng voorskrifte. Die belangrikste hiervan is die volgende:

Die ooreenkoms moet in verstaanbare taal geskryf wees.

Misleidende voorwaardes word verbied.

Voorwaardes waar gemeenregtelike regte van die kredietopnemer weggeneem of beperk word, is ongeldig.

Regte wat weggeneem word van die kredietopnemer wat deur die Wet daargestel word, is ongeldig.

Rentekoerse, fooie en kredietversekering moet duidelik aangetoon word.

Differensiasie tussen rente op lopende en agterstallige bedrae in dieselfde ooreenkoms word verbied. 'n Nuwe ooreenkoms moet in elke geval gesluit word. 'n Voorbeeld hiervan is agterstallige paaiemente by huurkope.Wysiging van kredietooreenkomste Verlaging van kredietlimiete kan deur beide partye gedoen word. Tydelike verhogings kan op aanvraag deur die kredietopnemer gedoen word, op voorwaarde dat die kredietlimiet weer binne 'n ooreengekome tyd herstel word na waar dit was. Alle ander verhogings van kredietlimiete mag slegs gedoen word nadat 'n nuwe evaluering van die kredietopnemer se finansiële posisie gedoen is. Wysigings kan slegs deur die klant self aangevra word. Kwotasie Die kredietgewer moet 'n voorooreenkomsstaat of kwotasie aan die kredietopnemer verskaf waarin rentekoerse, koste, fooie en kredietversekering uiteengesit word. Die kredietgewer is vir vyf dae daaraan verbind waarbinne die kredietopnemer die kwotasie kan aanvaar. Die kredietopnemer kan egter ook die kwotasie onmiddellik aanvaar indien hy/sy dit so verkies. Groter deursigtigheid dra dus by tot 'n meer ingeligte besluit deur die kredietopnemer. Regte van kredietopnemers Verskeie regte word aan kredietopnemers gegee, waarvan die volgende enkele voorbeelde is:

Die reg om aansoek te doen vir krediet, welke aansoek ooreenkomstig die kredietgewer se normale beleid oorweeg moet word.

Gebruik van die taal van jou keuse.

Die reg om te weet hoekom 'n aansoek afgekeur is.

Die reg om onder sekere omstandighede aansoek te doen vir skuldhersiening en herstrukturering van die skuldlas.

Die reg tot 'n afkoelperiode van vyf dae by huurkope indien die transaksie nie by die kredietgewer se geregistreerde besigheidsplek plaasgevind het nie.

Die reg om huurkoopitems vrywillig terug te gee.

Die reg tot verkryging van volledige inligting aangaande die krediettransaksie, relevante dokumentasie en state.

Die reg om inligting van kredietburo' s se swartlys te laat verwyder sodra die skuld betaal is.

Beskerming teen onreëlmatige bemarking.

Die reg tot vertroulikheid insake inligting.Oormatige skuldlas 'n Kredietopnemer het 'n oormatige skuldlas indien hy nie sy skuld kan betaal in terme van sy kredietooreenkomste nie. Prosedures kan in so 'n geval deur die kredietopnemer gevolg word vir skuldhersiening en strukturering. Roekelose krediet 'n Kredietverskaffer is skuldig aan roekelose kredietverskaffing indien hy onder die volgende omstandighede krediet sou toestaan:

'n Behoorlike ondersoek aangaande die kredietopnemer se finansiële posisie is nie gedoen nie.

Die kredietopnemer het nie die algemene risiko's, koste of verpligtinge van die ooreenkoms verstaan nie.

Die aangaan van die ooreenkoms laat die kredietopnemer met 'n oormatige skuldlas.'n Groter verpligting word op kredietgewers geplaas rakende die insameling en verifiëring van inligting en die evaluasie daarvan. Groter beskerming word sodoende aan skuldopnemers gebied.Afdwing van ooreenkomste Die Wet maak voorsiening vir ander metodes van dispuutoplossing behalwe die normale skuldinvordering. Voorsiening word gemaak vir liggame en partye soos :

die Nasionale Verbruikerstribunaal;

skuldberaders;

'n ombudsman;

verbruikershowe; en

alternatiewe dispuutoplossings-agente.Die gevolg van die nuwe Kredietwet is dat die normale prosedures van skuldinvordering drasties verander. Dit verg derhalwe meer omvangryke administrasie en ook meer van die aansoeker se tyd. Met die tandekrypyne van die eerste aansoekseisoen na die bekragtiging van die Wet grootliks agter die rug, beywer NWK hom om sy relevante prosesse voortdurend te monitor en waar nodig te verfyn. Indien veranderings aan die Wet in die toekoms sou plaasvind, sal NWK se kredietklante beslis daaroor ingelig word.

Reckless lending and the NCA

Nearly half of the 18.07 million consumers with credit in South Africa are struggling to meet their debt obligations, Gabriel Davel, the chief executive of the National Credit Regulator, says. Davel says that, according to credit statistics to the end of December last year, 10.16 million credit accounts had been in arrears for more than three months. Over-indebted consumers may be able to have a credit agreement set aside if it is found that they have been granted credit recklessly in terms of the National Credit Act. If you have been granted credit recklessly, it generally means you have been lent more than you can afford to repay. Earlier this month, a Port Elizabeth magistrate's court ruled that Absa was guilty of reckless lending (See below). To prove reckless lending you must be able to prove that you were not able to afford the loan when you made the credit application. If a debt counsellor suspects a case of reckless lending, he or she will refer you to an attorney who can take the case to court. The attorney's costs could be for your account. However, reckless lending cases are rare and, as a consumer, you also have a responsibility to truthfully disclose your finances when making a credit application. If you lie to a creditor about your finances or expenses, your case may not be regarded as reckless lending. At the same time, creditors are expected to review your financial history where possible and to check your finance application against that history. The banking ombudsman, Clive Pillay, says his office receives about 50 complaints related to reckless lending each month, mainly against the four big banks - Absa, First National Bank, Standard Bank and Nedbank. He says a number of the cases are related to loans taken out about two years ago, before the recession and retrenchments left many unable to meet their repayments. Pillay says the overwhelming majority of the complaints are without substance - if you were able to afford the loan when it was granted and your circumstances have since changed (for example, you have been retrenched or interest rates have rocketed) then it is not considered reckless lending but simply over-indebtedness. (See "What to do if you are over-indebted"). "In the odd one or two cases, we refer complaints to the National Credit Regulator for further investigation. Making a ruling on reckless lending is not within our jurisdiction," he says. Pillay says there was a ruling of reckless lending against a bank in April last year and this case sheds light on what checks and assessments credit providers need to do to ensure that they are not granting credit to you recklessly. Loans set aside In last year's case, the Johannesburg magistrate's court ruled that African Bank was guilty of reckless lending and set aside a consumer's three loan agreements for a total amount of R14 000. The consumer, an employee of Nampak, had five dependants - a wife and four children. His basic salary was R6 790, but his salary fluctuated depending on overtime worked and, for example, in August 2008 his salary was R9 638. He had been granted loans from African Bank of R4 000 in July 2007, R11 000 in January 2008, R1 500 in April 2008 and R1 500 in May 2008. He was also granted a loan of R21 500 by Capitec Bank in September 2007, but the ruling notes that this loan was obtained to pay off debts with African Bank and, in fact, it was the three loans granted by African Bank that amounted to reckless lending. The NCA obliges creditors to fulfil certain criteria before lending you money, and the ruling points out where African Bank failed in its duty: Credit providers have to adequately assess the information they are presented with. "A brief consideration of the applicant's bank statement shows that he is every month left with a very small amount or nothing ... it is reasonable to assume that if the loan consultants employed by African Bank conducted a credit bureau inquiry, they would also access African Bank's own records to consider the applicant's previous accounts and applications for loans. Voluminous documents attached ... attest to this information being accessible and reasonably available to African Bank's loan consultants"; Credit providers should not simply go through the motions of conducting a financial assessment. "In conducting an assessment, [a] credit provider should not merely apply the principles and the purpose of the NCA in a mechanical fashion. A credit provider should actively engage with the consumer to do a proper assessment; Discrepancies in the loan applications should have been glaringly obvious to the loan consultants. For example, the applicant's expenses for food and groceries decreased between July 2007 and May 2008, although his dependants remained the same. "Two of the children are in their early teens. The needs of children - especially teenagers - tend to increase as they become older and a decrease of the applicant's expenses should have prompted African Bank to caution." The importance of consumers being able to understand their rights and obligations under a credit agreement. "The home language of the applicant is Zulu, as is clear from the fact that he requested the service of a Zulu interpreter in court. The contents of the agreements are, however, drafted in English. There are no indications that the (legally complex) contents was translated or even interpreted into Zulu to the applicant." The ruling goes on to say that "African Bank perhaps relied on the applicant's propensity to easily accept loans and kept on enticing the applicant to take further loans". According to the ruling, this is supported by the fact that the applicant stated that "African Bank call you all the time and give you money". The ruling says that this conduct by African Bank had an adverse effect on the applicant's financial circumstances and "as this practice does not encourage responsible borrowing, the fair order would be to set aside all the applicant's rights and obligations under all the agreements entered since January 30, 2008". Tami Sokuto, an executive director of African Bank, says the bank believed the judgment was wrong but decided not to appeal or take the matter further as this would be unfair to the consumer. Absa found guilty of reckless lending A magistrate's court ruling on reckless lending earlier this month resulted in a Port Elizabeth pensioner having his mortgage bond with Absa set aside. According to a Bloomberg report, about 20 months ago Absa agreed to lend the 81-year-old pensioner R350 000 so he could help his daughter's business. He applied for the loan against his unbonded property, which was worth R1.5 million. Louis von Zeuner, the deputy chief executive of Absa, told Bloomberg that the daughter stood surety for and was a guarantor of the loan. However, attorney Pierre Kitching, who represented the pensioner in the magistrate's court, says there appears to have been no assessment relating to his daughter's finances, and there is no mention of her income being included in the assessment criteria on the loan application. The loan repayments were R4 200 a month. The pensioner's monthly income was R3 700 and his household expenditure was R2 472 a month. When he defaulted on his repayments, the bank threatened to repossess the property, at which point he sought assistance from debt counsellors Debt Smart. Barry Pinnock, the debt counsellor who referred the case to Kitching, says the pensioner had applications for similar loan amounts turned down by Standard Bank and First National Bank. Happy Ntshingila, the chief marketing and communications executive of Absa, told Personal Finance that, after it has studied the judgment, Absa might contest the ruling, because the bank adheres to the lending criteria set out in the National Credit Act. What to do if you are over-indebted If you feel your debt is unbearable, you should contact a debt counsellor who can then assess your finances to determine whether or not you are over-indebted. If you are, the counsellor will notify all your creditors that you are undergoing debt counselling and will draw up a repayment plan for you. If you and your creditors agree to the repayment plan, your debt counsellor will present the plan to the National Consumer Tribunal for approval. If any creditors disagree with the plan, the counsellor must ask a magistrate's court to rule on whether or not it is acceptable. You can find a debt counsellor in your area on the National Credit Regulator's website: www.ncr.org.za (Click on "Debt Counselling" on the left of the screen, then click on "Search for debt counsellors"). How is reckless lending defined? According to the National Credit Act, a credit agreement is reckless if, at the time that the agreement is made, the credit provider either: Failed to conduct a financial assessment, regardless of the outcome that such an assessment might have had at the time; or Having conducted a financial assessment, entered into a credit agreement despite information showing that the consumer did not generally understand or appreciate their risks, costs or obligations under the agreement or that entering into the agreement would make the consumer over-indebted. You are considered to be over-indebted if your living expenses and your debt repayments together exceed your income. When credit providers assess your ability to repay a loan, they should be deducting your living expenses from your income first and then using the balance of your income to make an assessment. Visit