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Good Debt vs Bad Debt

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As a general rule, it is important to understand that all debts are effectively defined by the consensus that we as consumers are given money/the chance to spend in the now while only paying back later. The definition of debt is simply stated as “a sum of money that is owed or due”, while differentiating good debt from bad debt is almost always circumstantial.

The subject of debt is often associated with money concerns and poor financial decisions that have led to regret and have, in some cases, been a catalyst to change through services like Debt Review and Debt Counselling. Given how many financial consumers are currently over indebted and seeking the assistance of trusted financial advisors like our team at Less Debt, it is no wonder that bad debt is prevalent and cause for concern. Because of our countries harsh economic climate, continually rising cost of living and scarcity of work, bad debt has overshadowed good debt, but this does not mean that good debt should be ignored.

Any debt that decreases in value once it has been attained can be considered bad debt, while good debt often makes it easier for bad debt to be avoided down the line. Unfortunately for many low to middle class consumers, unexpected changes in cash flow and unmanageable finances result in taking out bad debt in order to maintain basic living expenses. Basic living expenses could include anything from groceries and clothing to car repayments and credit card repayments, all of which are notorious for their high interest rates.

At this point you may be asking yourself what good debt could be, and what separates it from its neighboring counterpart, bad debt? Good Debt stands out in a few notable instances, which our financial team have summarized below:

Debt for educational purposes: Good Debt is often aligned with an individual’s investment in their personal growth and financial worth. Many would agree that debt taken to further ones education, such as a student loan, often ends up paying for itself and proving invaluable. Student Loans typically have lower interest rates and flexible repayment plans, making them much more manageable. Considering that most high paying jobs in South Africa require candidates with degrees and relevant qualifications, an investment in your education is most certainly an investment in your future and quality of life.

Small Business Loans: If you are well-versed, experienced, successful and confident in a specified field or industry, a small business loan could be the stepping stone needed to help you finance your start-up company and run it successfully. With a good business plan in place, the possibilities are endless, however some of the best startup companies are still unable to make it past the first few years. Although small business loans do not guarantee success, these are another good example of investing in your net worth, sometimes proving to be well worth the risk. Before you apply for a small business loan, ask yourself if you are ready to handle the worst-case scenario and make sure that you have a back-up plan in place to avoid potential debt related problems.

Property Investment: It is widely understood that property investment brings with it tremendous benefits, in cases where payment agreements are honored and homeowners have done their research. Instead of paying off someone else’s bond, purchasing rather than renting allows you to pay off your own bond and eventually reap the benefits of owning a fully paid for property. Homeowners can look forward to a potential increase in personal wealth, with long term benefits also including security and equity. Home values also increase over time, making them more valuable to their owners.

For any queries relating to good debt vs. bad debt or assistance with your current financial concerns, check in with our reputable and highly skilled Less Debt team today. We offer a range of reliable financial solutions to South African consumers who need it the most!

Debt Stress of 2020

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With the recent New Year celebrations now only a dim memory and January already over, most South African citizens have returned to work and their daily routines, which for many of us involves revisiting the financial pressures of the year before. While the start of a new decade should signify hope and new beginnings, the Debt Stress that is expected for the year 2020 has us feeling far from optimistic.

Our country has been facing excessive debt related problems for the past few years, as South Africa’s economy fails to improve and jobs become harder to find. The frightening reality that so many individuals rely on their credit cards or accounts to make it through a month shows that we’ve gotten comfortable living beyond our means. Though it might provide short term relief to struggling consumers, counting on credit to splurge over Christmas or afford a family holiday is only going to make your situation worse.

For the majority within low to middle income families, the debt-to-income ratio is massively out of proportion and continues to worsen as our economy shrinks and unemployment rises – our current unemployment rate is approaching 30%. With impending recession posing a very real threat, it is concerning that so many consumers have made no adjustments to their spending or curbed their unrealistically high standards of living. Retailers continue to encourage shoppers to indulge, while every few months a newer and better cellphone or TV hits the market.

As we spiral further down the dark hole of debt and financial strain, it becomes harder to see the light, but there may no longer be an option as 2020 is looking to be another difficult one. This year, we are facing a possible electricity price increase of a whopping 17% percent, despite consistent load shedding. Load Shedding also makes it almost impossible for new and small business to thrive and grow in South Africa, which can effectively strengthen our fragile economy, create employment opportunities and help turn things around. Unresolved debt leads to mental and physical strain, while also leaving its mark on your loved ones over time.

With unsettling outcomes projected for Debt Stress in 2020, it is more vital than ever that careful spending and proper budgets be actioned. A vicious but unchanged cycle of rising debt from household to household and even within our own government means that we are very close to being downgraded to junk status, also known as “non-investment grade speculative”, which means that any potential financial aid from other countries will cost our country more, weakening our currency further and in turn causing massive price hikes on everything from basic groceries to medical aid, property prices and petrol.

To gain control of your finances and unresolved debts, check in with our skilled Less Debt team today. At Less Debt, our qualified team of financial experts work with various clients who are seeking to overcome their debt stress and change their spending habits. We urge consumers to approach 2020 with caution as far as their finances are concerned, making provisions for emergency funds to get through tough times. Our team provides effective Debt Review and Debt Counselling services to South African consumers that uplifts their money mindset and promotes living within a budget and staying clear of debt.

How to identify if you are in over your head with debt

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Many South African consumers are faced with the constantly rising cost of living, which leads to an increase in monthly financial pressures. Before you know it, credit card and loan repayments are keeping you up at night and you find yourself over indebted and unable to survive from month to month, while still fulfilling your debt repayment obligations. While it is never intended, debt sneaks up and over time, can affect many areas of your life.

While there is no definite formula that leads to being over indebted, the signs usually present themselves early on. At Less Debt, our well versed consultants work with a range of consumers in providing comprehensive debt management services, knowing that professional assistance can often make a notable impact on an individual’s financial outlook. Our Less Debt team oversees thousands of monthly enquiries, where consumers (even those falling in the higher income bracket) are overwhelmed and unable to resolve their financial setbacks by themselves.

Out of more than 25 million South African’s making use of credit, 13 million have bad credit scores and will have trouble taking out another loan. These numbers are significant and do not even take into account the many other individuals weighed down by insurmountable debts every day, without any silver lining in sight. Our Less Debt team make is our mission to provide reliable and result driven services, which include dedicated Debt Review and Debt Counselling.

There are a few telltale signs that will help you understand if you are over indebted. Once you are able to accept what you are facing, it will be easy for our Less Debt team to address your concerns and provide effective debt management solutions that are aligned with your financial needs.

Your debts are keeping you up at night – When overcome by debt, you may find yourself lying awake at night worrying about upcoming payments, potential threats such as asset repossession that result from late payments, or even how you are going to put food on the table. These negative feelings will break down your mental health and can affect your loved ones too.

Once your debit orders come off, you cannot afford to make ends meet – There needs to be stability in your finances, which is something that many consumers struggle with. Your monthly budget should balance monthly living expenses and all monthly instalments, however many over indebted consumers cannot afford rent or groceries once their instalments come off.

Counting on payday loans for quick relief – Taking out a short term loan to make it through a difficult month initiates a snowball effect, where the immediate relief is outweighed by the long term effects. Though an extra R1000 makes a difference this month, next month you will be more than R1000 short, plus any interest on that loan, adding strain to your already tight budget. As you continue to rely on loans to make it through every month, your monthly finances will quickly become unmanageable.

Being overwhelmed by debt obligations at month end – If the end of the month arrives and you feel suffocated by your financial burdens and unmanageable bills and instalments, you definitely need to consider seeking out help. Carrying on this way will only worsen your outlook on financial relief, as well as driving you to incur more debts.

For reliable debt management services that are geared to your unique financial requirements, check in with Less Debt today. We are here to make your finances easier to manage!

Denial about the severity of your debts, or the “quick fix” mind set – Sometimes it is easier to tell yourself that your debt is only temporary, or believe that by next month you will have it under control. When denial sets in and you start making excuses, they will eventually catch up with you.

Struggling to pay back monthly payments on smaller accounts – When faced with too much debt, it is likely that bigger debts, such as car payments and students loans, will be prioritized. By doing so, smaller debts can sometimes take a backseat on a tight budget, which could lead to late or missed payments that are a sure sign of being over indebted.

How to create a monthly budget

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A monthly budget is one of those often overlooked but incredibly important financial necessities that can change the way you manage your finances. Regardless of your salary, expenses and financial obligations, a monthly budget equips you with the power of control over your money, which saves you from nasty surprises, like running low on cash before the month is over or forgetting to make certain payments that aren’t set as debit orders to your account.

Another important factor to consider is saving, which is much more achievable when a monthly budget is in place. For many low to middle class South African citizens, it can seem nearly impossible to save money on a monthly basis, as there are rarely enough finances left to save by the end of the month. Once your monthly budget is implemented, your spending plan is outlined from the beginning and can include savings.

In order to set up an effective and realistic monthly budget, you cannot paint over any expenses – it is important to be honest with yourself, even if the results are an eye opener.

  1. The first step to creating a monthly budget is to identify your income. If your salary or income changes from month to month, use the lowest overall figure (your basic salary or income before any extras) to accommodate months were your commission or extra income might not form part of the picture.
  2.  Once you have a clear idea of your monthly income, you need to identify and separate your expenses into categories of fixed expenses, (which include rent or mortgage, car payments, medical aid, insurance and loan repayments) Essentials (which include utilities, petrol and groceries and kids extra murals) and other expenses (anything extra, such as trips to the mall, hair appointments or outings with the family). It can be helpful to check your past bank statements to gather some of this information.Once you have completed step 2, you should also be able to determine if you are spending more than you’re earning each month. Small expenses, such as a takeaway coffee every week, can quickly add up.
  3. Set money goals. If you are over indebted, a budget can help you to identify unhealthy spending habits and set goals. Working within a budget that restricts your spending habits can help you to avoid more debt, leaving you free to focus fully on overcoming existing debts with the help of our professional Less Debt team.
  4. Make the necessary adjustments to your way of spending before concluding a finalized budget. If it is necessary, cut out excess costs – remember, the less you spend, the more room you have to save and pay off your debts more quickly.
  5. Prepare for worst case scenarios. Life is unpredictable and financial setbacks happen when you least expect them. Always have an easily-accessible emergency fund available to avoid taking out last minute loans.

By following these steps and sticking to your monthly budget, you will find that your financial situation gradually improves. For professional Debt Review and Debt Counselling services, check in with our Less Debt team today.

Reckless Lending

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As a South African consumer earning a basic salary and attempting to make important progress in your life, be it for the best interest of your family or to overcome unexpected financial setbacks, the prospect of attaining useful credit can make a big difference.

The issue does not lie in attaining the occasional and necessary loan, but rather comes into play when debt builds up and can no longer be managed – this results in consumers becoming over indebted, missing monthly payments and instalments because of financial shortcomings and then suffering the unfortunate consequences that come with it. Consumers who are not able to honour their credit agreements face the possibility of legal action taken against them, including asset repossession, which can take a huge toll on an individual and family’s wellbeing and sense of security.

Reckless Lending, as defined by the National Credit Act (NCA), occurs when a creditor allows a consumer to enter into a credit agreement without first conducting an affordability assessment. An affordability assessment outlines a person’s current finances in detail, determining whether or not they will be able to take on an additional monthly expense and pay it back in the allocated time frame.

In certain cases, the financial burden of being in deep debt can be the result of poor planning, sudden loss of income or a change in living expenses. Many consumers do not realise that reckless lending is also a (not very farfetched) possibility that could have landed them in debt, which is where Less Debt comes in. As part of our service to our clients who suspect Reckless Lending, we will place you under debt review after conducting a thorough affordability assessment. During this time, we will take into account your financial circumstances during the time that you acquired the debt that has caused you to become over indebted – this includes your foreseen income and expenses at the time, as well as your net income, credit obligations and the credit repayment plan.

Through an affordability assessment, creditors know what the applicant’s salary, monthly financial expenses and commitments, existing debts, financial means and projections indicate – the regulation of an affordability assessment is entirely for the well-being of consumers who may very well be entering into a contract without the financial means to follow through, or even a full understanding of what is expected of them. It is very important that the consumer in question understands the credit agreement and is not blindsided by crazy interest rates or unclear terms and conditions – this is why the creditor needs to explain all the risks in advance, to avoid reckless lending.

Our Less Debt financial experts provide a trustworthy and effective service to clients, where we are able to identify reckless lending and assist you from there. If you have been victim to reckless lending, we will be in the position to negotiate lower payment rates with the creditor that has come up as a reckless lender in our report – this important step gives us plenty of leverage during the negotiating stage, and can drastically reduce the monthly instalment you are expected to pay back.

A recent study, conducted near the end of 2018, points to the possibility that as much as 40% of all credit made available from 10 of South Africa’s most acclaimed providers could have been reckless lending. This is a scary statistic that is concerning to everyday consumers who put their trust in credit providers who promise transparent financial solutions. If you suspect that you have fallen victim to reckless lending or require professional assistance, check in with our reputable Less Debt team today by filling out our online contact form. All of our financial services are approved by the National Credit Regulator (NCR).

How do you know if your debt counsellor is registered?

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As an over indebted South African consumer in search of assistance with debt problems, Less Debt offers a reputable service that gives our clients peace of mind. The reality facing middle class citizens is a harsh one, with financial instability resulting from the continually rising cost of living that has become harder to sustain over a long period of time.

Unfortunately, there are a number of unregistered debt counsellors offering their services to consumers, offering a false sense of security while in truth ending up actually doing more harm than good. In order to ensure that you are benefiting from debt solutions that are upfront, 100% transparent and completely legal, you will need the assurance that your debt counsellor of choice is in fact registered with the National Credit Regulator (NCR).

One of the National Credit Regulators of South Africa’s main objectives is to oversee the registration of industry participants i.e. debt counsellors. Anyone applying for debt review or debt counselling can benefit from visiting the National Credit Regulators website, which lists a directory of registered debt counsellors in your area. At Less Debt, we provide a Debt Counselling services that is registered and highly focused, for the best interests of our clients.

Before undergoing debt review, it is important to understand that there is a difference between voluntary debt restructuring and proper, legal debt review offered by a debt counsellor that is registered with the National Credit Regulator. One of the main differences is that only legal debt counselling offers consumers protection from legal action, which can include the possibility of asset repossession. Asset repossession is a very real threat that is faced by many individuals who are weighed down by debt and late/missed payments, while effective and legal debt review or debt counselling services protect consumers from any such legal action, as they focus on clearing their debts and sorting out their financial issues.

Debt counselling companies that are posing as legit can cause real harm to unsuspecting clients. You are not protected by the law if your debt counsellor is not registered, and could end up wasting your time and money for nothing. It is imperative that you as a consumer do proper research before falling victim to incompetent debt counsellors, who are not operating under the legal debt counselling process.

If you suspect that your current debt counsellor is not registered, get in touch with the National Credit Regulator to express your concerns and report the issue. You can also get in touch with the Debt Counsellors Association of South Africa (DCASA) for further assistance.

Wondering what the next step is? Our Less Debt team of financial professionals will gladly assist, stepping in to provide quality debt counselling and debt review services that you can rely on. Our reputable debt counselling services are registered with the National Credit Regulator, under nr. NCRDC3041. Less Debt is also a member of the Debt Counsellors Association of South Africa, DCSA number 0765.

Fuel saving hacks to get you further for less

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Over the past year, South African consumers have faced petrol increase upon petrol increase, with the cost per litre up by R2 since January 2019. Sadly, there does not seem to be an end in sight, with more price escalations set for the months to come. These consecutive fuel hikes, together with tax increases and the ever increasing cost of electricity, food and other basic necessities, are causing middle class citizens to suffer financially.

While there is not much we can do about the rising costs of fuel, we can certainly do our best to drive as economically as possible when trying to save petrol. Our Less Debt team have compiled a few petrol saving tips to ensure that you are spending as little as possible on petrol.

Know when to use your air con

There is plenty of speculation that using your car’s air con takes a toll on your petrol, however few people realize that driving with open windows increases drag and slows down your car, in turn using more fuel to run. Try only using your car’s air con or rolling down windows when necessary, as both cause your car to use more petrol.

Keep the weight to a minimum

A lighter car uses less fuel, so avoid driving around with heavy and unnecessary items in your car for no reason, such as gym or music equipment, bikes and luggage. This is also a great excuse for a less cluttered car that does not get dirty as fast.

Maintain your car and tyres

Make sure that your car is regularly serviced and check for oil changes often. A car service will reveal any issues that may be causing you to use more petrol, while also maintaining engine efficiency. Also be sure your tyre pressure is correct, as low tyre pressure causes your engine to work harder and burn more fuel.

Know when to change gears

Don’t be afraid of using higher gears. Driving around in a lower gear puts strain on your engine, while moving up a gear usually uses less fuel. Driving in fifth and sixth gear or using cruise control are much more fuel efficient. Leave the racing and revving to the pros as focus on driving smoothly to save petrol.

Car pooling and lift clubs
Sharing your trips to and from work with a friend living close by not only saves on petrol but also makes traffic more bearable. Take turns driving and literally cut your petrol expenses in half when getting to work and back.

Slow down on the roads
The faster you drive your car the more fuel you will use. Avoid speeding (and the nasty fines that come along with it) to save petrol. Also avoid over-revving and stamping down on brakes and petrol. Slow down as you approach a speed bump rather than breaking and accelerating.

Don’t fill your tank to the top
So many of us do it, but in fact filling your car to the top is a waste of money, as exceeding the tanks capacity causes the fuel to evaporate. Always ask the petrol attendant to stop at the first click, or when the pump switches off automatically.

There are just a few ways that you can save on petrol.

At Less Debt, we provide reputable and National Credit Regulator (NCR) registered Debt Counselling and Debt Review services to South African citizens. Check in with us today to benefit from our professional services.

Are you in control of your debt, or is your debt controlling you?

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Are you in control of your debt, or is your debt controlling you?

The harsh reality faced by many South Africans today is that our salary increases are not on par with the continually increasing cost of living. Although it is not fair or even realistic, the past few years have shown that increases on an almost monthly basis are to be expected, with many working class families slowly falling deeper and deeper in debt.

Although an annual increase of about 6% is standard in most corporate environments, this small sum is almost nothing when compared to the alarming rate at which basic expenses such as petrol, electricity and food are rising. Increases in the cost of electricity and petrol, which have both proven to be persistent and seemingly without end, automatically lead to a hike in the cost of food and other essentials, like a domino effect that slowly chips away at the stability of our lives. There is no way for individuals who are already just getting by to make through life debt free with the ever rising cost of living, which can go from manageable to overwhelming in as little as a year.

Sadly, the relief that a personal loan offers beckons many who are falling short financially, leading to trouble with debt that has nothing to do with poor money management skills – families need to be fed, bills need to be paid and sometimes there is no other option. At Less Debt, our team of well equipped financial experts are available to assist struggling South Africans, by offering reliable and transparent Debt Review and Debt Counselling services that are geared towards our client’s individual needs. For consumers who are weighed down by the burden of being over indebted, a well constructed new payment plan is enough to add structure and peace-of-mind.

Less Debt’s professional services can help you to manage your finances without facing asset repossession. Asset repossession places a huge amount of pressure on your family and other important relationships, while affecting your mental wellbeing. Many times, debt is accumulated out of desperation, which is proving to be the case more and more often, as South African citizens are directly impacted by the dire and unrelenting reality of South Africa’s unstable economy.

As South Africans, we are all affected by inflation; however in some cases it is more complicated than a simple budget cut or lifestyle change – with a tight and uncompromising budget, there is no room to adjust spending, which is why so many working class citizens find themselves struggling to make it without relying on debt, credit cards or clothing accounts. There is a simple way to overcome these challenges, all you have to do is enquire about Less Debt’s free debt assessment.

At Less Debt, we offer our clients the opportunity to start fresh, without the pressure of unmanageable financial obligations. Our Less Debt services are approved by the National Credit Regulator (NCR), while our first priority will always be you, our valued client.

Facing Car Repossession?

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Facing Car Repossession?

No one ever apply for Car Finance with the intention of skipping payments. Unfortunately, your financial situation can change any time. Then the what’s start…

What if I can’t pay my car at the end of the month?

What will the creditors do?

What will happen if they repossess my car?

If you find yourself falling behind on payments, there are certain do’s and don’ts that can make your situation a lot more manageable. Missing payments and short payments don’t mean that you are at the end of the road. There is a solution. But you must act now. Don’t wait until it’s to late to save your vehicle.

How does repossession work?

Before the bank can repossess your car there is a legal process that must be followed. The bank can only legally claim possession of your vehicle in the following two ways.

Voluntary Surrender

This is most credit providers’ preferred method of repossession. It’s an easier and quicker method for the bank to recover the vehicle.

This is what you must know. You are under no obligation to sign a voluntarily agreement and hand over your car. Don’t be intimidated or bullied by them. You have rights. You have the right to apply for Debt Review. DON’T SIGN ANYTHING! If you are not sure take a picture and send it to our WhatsApp number 084 227 7764.

Court Order

The final step is by court order. This will allow the vehicle financier to reclaim your vehicle. A court ordered letter will need to be delivered by a sheriff of the court or a police officer, and will display the official stamp of the court. If it’s not a court order – DON’T SIGN ANYTHING! If you are uncertain take a photo of the documentation and WhatsApp the photo to 084 227 7764.

Less Debt can help you to legal protect your car from repossession. Contact us today before it’s to late.

Spending with Credit Card vs Real Hard Cash

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As South Africans faced with a weakening economy we find that, as the years go by, it becomes harder and harder to avoid credit. Without a credit history for reference, it is impossible to take out a loan for a house or car, which are good examples of purchases that most consumers cannot simply make once off, in cold hard cash – for reasons such as these, credit cards play a big role in the way we spend, as well as in the way our financial identity is formed.

Unfortunately, credit cards can also enable spending habits that are not in your best interest. The false sense of being able to afford something by simply using a credit card has been attributed to many individuals becoming over indebted in South Africa. Though credit cards can be convenient, there are certainly downfalls, one of which includes high interest rates on monthly repayments – consumers that are used to shopping, going out and getting through a month on credit do not realise that they are actually paying back a large amount on interest, effectively losing money and paying more than they should for the simple convenience of not having to fork out cash for a purchase, or save for a fancy date or special occasion.

Another downfall to utilizing a credit card is that consumers can quickly develop a habit of overspending, as the immediate impact of money lost is not felt as it would be with a cash purchase. When you spend with cold hard cash, you are able to justify certain expenses more clearly and can also avoid purchasing unnecessary items, because you are more aware of your financial restrictions. Our Less Debt team of financial advisors have identified that overspending on credit cards is a common habit in many of our over indebted clients and as such, we encourage consumers to proceed with caution when spending with credit instead of cash.

For individuals who have great self control and are not currently weighed down by debt or multiple financial obligations, a credit card can prove to be useful in some ways – you are able to build a good credit score if you use your credit card well and don’t have to worry about travelling with cash and being liable for money that may go missing or get stolen. For individuals who are weighed down by financial obligations and already have a selection of accounts and payments to worry about every month, credit cards are not advisable and can easily have the opposite result – just a few late or missed credit card payments can tarnish your credit score for years to come and have a negative impact on your reputation with money as well as the wellbeing of your family.

When deciding whether to make us of a credit card vs. cold hard cash, it is almost always better to use cash and avoid credit cards. If you are currently facing credit card debt, check in with Less Debt for professional assistance and transparent solutions.