What does it mean to be overindebted?

Bought a car, a house, furniture, clothing or building material on credit, or did you take out a loan? Are you happily paying what you borrowed back to the credit provider? Even though you are indebted to the bank you are still comfortable with your household needs and wants and making your debt payments without stressing every month about a lack of money.

To be overindebted means you owe money that you need to pay back, but you struggle to do so. Consumers can find themselves with reduced household income, or lose their commission structure, or their spouse loses their job. Maybe they were not properly covered for medical situations and the only way was to take out a loan. Sometimes consumers just see how easy it is to get credit and use it to keep up appearances on social media or “keep up with the Joneses”.

Overindebtedness does not mean you are bound to a life of struggle and stress. There are many options available and it's simply a matter of finding the one that suits you. Unfortunately, most consumers stick their heads in the sand for longer than they should, which only makes the problems grow and take much longer to sort out. 

The biggest hurdle to conquer is pride. If you’re struggling to make those monthly debt repayments, taking out another loan to cover the loans you already can’t afford is just putting a Band-Aid on the problem. As soon as you think you’re becoming over-indebted you should ask for professional advice. With debt counselling/debt review, your assessment is obligation free; it doesn’t sign you up for anything. It’s there for you to get a professional outlook and education on what your situation is, and what you should do, going forward.

It’s also helpful to identify friends and family around you that may be going through financial struggles. Sometimes they don’t know who to turn to or where to start. If you can be open to listening and not judging them, you could help them more than you will ever know.

Being over-indebted can affect your physical and mental health, work, and relationship. 

Though there are more than 24-million credit-active South Africans there seems to be a stigma attached to being overindebted. Debt Counselling Association of SA estimates 10-million people in SA have bad debt, meaning they have missed three or more debt repayments.

Debt counselling is a debt relief measure available in SA provided for in terms of Section 86 of the National Credit Act 34 of 2005 as amended. This process is intended to assist over-indebted consumers who are struggling with debts, by offering: 

• budget advice;
• negotiations with credit providers for reduced monthly debt repayment and interest rates;
• restructuring of your debt; and
• assessment of income and expenses.

This article was paid for by the DCGSA.