Can I Get Lower Monthly Debt Payments in South Africa?
Short answer: Yes, it's often possible. You can ask a creditor for a payment arrangement, take a debt consolidation loan if you qualify, or apply for debt review. Debt review can combine your debts into one lower payment by spreading them over a longer time and negotiating with creditors. How much lower depends on your income, your debts and your creditors.
Why are my debt payments so high?
Monthly debt payments in South Africa can add up fast. Personal loans and credit cards often carry high interest rates. Store accounts add monthly fees. On top of that, you may have a car payment, a bond and a cellphone contract.
Each payment might look fine on its own. But together, they can take a big bite out of your salary, especially when food, fuel and electricity costs keep rising.
The good news is that there are ways to bring that monthly total down. Each one has pros and cons.
Option 1: Ask your creditor for a payment arrangement
You can phone a creditor and ask for a lower payment. This works best when:
- You only have one or two debts.
- Your money problem is short-term, like a few months of lower income.
- You call before you fall far behind.
Be honest about what you can afford. If the creditor agrees, ask for the arrangement in writing. Keep in mind that each creditor decides for itself, and a lower payment may mean the debt takes longer to pay off.
Option 2: A debt consolidation loan
A consolidation loan is one new loan that pays off several others. You're left with one payment, which may be lower if the new loan has a longer term or a better interest rate.
The catch is that you need a good credit record and enough income to qualify. If you are already missing payments, banks may say no. Also, if you keep using the accounts you paid off, you can end up with even more debt than before.
Option 3: Debt review
Debt review is a legal process under the National Credit Act. It's designed for people who are over-indebted and can't keep up with all their payments.
A registered debt counsellor looks at your income and essential expenses. They work out what you can realistically afford to pay towards debt each month. Then they send a proposal to your creditors to restructure your debts. The plan may:
- Spread your debt over a longer period, which lowers each payment.
- Ask for lower interest rates and fees.
- Combine all your debts into one monthly payment, paid through a payment distribution agency.
Once a court or the National Consumer Tribunal approves the plan, creditors must accept the new terms. You also get protection from legal action on the included debts, as long as you keep paying.
Want to know if your monthly payments could come down?
See if you qualify for lowered debt paymentsA few quick questions, no obligation. Every situation is different, so results are not guaranteed.
How does spreading debt out lower the payment?
Here is a simple example. It's for illustration only and leaves out interest, so it isn't a promise of what your payment will be.
Say you owe R30,000 on a loan:
- Paid over 24 months, that's about R1,250 a month.
- Paid over 48 months, that's about R625 a month.
The total debt is the same. You just have more time to pay it, so each month is easier. In real life, interest rates also matter, and debt review negotiations may include lower rates. Your actual payment depends on your own debts and what your creditors agree to.
What are the trade-offs?
A lower monthly payment can bring real relief, but it's worth knowing what comes with it:
- It can take longer to be debt-free. A longer term means more months of payments.
- You may pay more interest overall if the rate isn't reduced much.
- With debt review, you can't take on new credit until you finish, and a note is added to your credit record.
For many people, these trade-offs are worth it. Having money left for food, transport and school fees at the end of the month makes a big difference.
Key takeaways
- You can ask creditors for a payment arrangement, apply for a consolidation loan or consider debt review.
- Payment arrangements work best for one or two debts and short-term problems.
- Consolidation loans need a good credit record, which many struggling people don't have.
- Debt review can lower your monthly payment by restructuring all your debts into one plan.
- Lower payments often mean a longer repayment period. Results depend on your situation.
Frequently asked questions
How much lower will my payments be under debt review?
It depends on your income, your essential expenses, your debts and what your creditors agree to. A debt counsellor can only give you a figure once they have looked at your full financial picture.
Will the interest on my debt stop under debt review?
Not necessarily. Interest usually continues, but the debt counsellor can ask creditors to lower interest rates as part of the plan. Creditors do not always agree to this.
Can creditors refuse a debt review proposal?
Yes, creditors can reject a proposal. The debt counsellor can then ask the court to approve the plan. If the court finds it reasonable, it can still make the plan legally binding.
Can I negotiate lower payments myself?
Yes. You can contact each creditor and ask for an arrangement. This can work if you have only a few debts. If you have many debts, or creditors won't agree, debt review may be a better fit.
Does lowering my payments hurt my credit record?
A payment arrangement may be noted on your account. Debt review adds a note to your credit record, and you can't get new credit while it is there. Missing payments altogether usually does far more damage.
Take a few minutes to check your options.
See if you qualify for lowered debt paymentsA few quick questions, no obligation. Every situation is different, so results are not guaranteed.
