Reduce interest on all outstanding debt
Interest is the root cause of expensive debt. In South Africa the creditors charge one of the highest interest rates in a global economy. It’s a cost that you can’t escape but with sound money management skills you find ways to pay less.
You pay interest for the time you use the credit. The longer you hold someone else’s money and use it, the more interest you will pay over the period. Now when you are behind on your current agreements, your debt becomes even more expensive. Your creditors hold the right to charge you additional interest on late payments and overdue accounts. So, in theory you are paying interest on interest. And if you leave it, it’s adding up daily. And before you know it you could owe more than double the amount of money you initially borrowed.
The National credit regulator (NCR) is aware of the consequences interest charge can have on one’s opportunity to recover from debt.
The In Duplum Rule
The in duplum rule has been part of South African’s law for more than one hundred years. Translated “in duplum” means “double the amount”. This common law rule states that interest on debt will cease to run where the total amount of arrear interest has accumulated to amount equal to the outstanding principal overindebtedness.
The rule was created to protect borrowers from exploitation by lenders who let interest accumulate to an unreasonable amount.
The statutory in duplum rule applies to all credit agreements under the NCA including banks, motor vehicle and asset finance companies. Importantly, it does not only apply to interest, but also to a number of other charges like service fees, initiation fees, administrative fees and insurance fees, under Section 103 (5) of the NCA.
To aid consumers experiencing financially difficulty, the NCR has provided professional debt advisers to assist with reducing interest charges.
A professional debt adviser can negotiate better interest rates
Just like credit providers, debt advisers are also registered with the National credit regulator or NCR. Their function is to help consumers that can no longer cope with their debt. They are authorized to act on behalf of the NCR & their client to enter negotiations with credit providers to reduce interest rates. This is interest rates on unsecured debt like credit cards, loans, and store accounts.
When a person is in debt, charging too much interest can affect their chance of recovering in a reasonable time. They would end up paying for years for debt that should have been settled in 3-7 years. This would hamper the person’s possibility of progressing in life and contributing to the economy. It’s all connected and therefore its beneficial for South Africa’s future prosperity that we keep consumer debt as low as possible.
By negotiating interest rates with creditors, the debtor (consumer) and creditors both benefits. The debtor will be charged a reduced interest rate which will reduce the total debt that must be repaid.
The creditor will be able to recover the principal debt they lent the debtor and some interest to be able to make a small profit from the transaction.
How to qualify for a reduction in interest
Reducing interest on credit agreements is only available to debtors that enter a debt restructuring program. With Debt review for example, the creditor must charge the new interest rate from when the debt review order is in place.
We spoke to a couple that waited 2 years before asking for a help. As a result, they accumulated over R50 000 of additional interest that they must repay. If they had gone under debt review after their second month of late payments, they would have been able to lock in up to a 50% less interest rate charged. There have been cases where a 20% interest rate has been reduced to 10%. This could have saved the couple in interest and reduced the period to repay their debt.
Your creditors understand that anyone can fall on tough times at any moment. Like with the covid pandemic that was unplanned and changed financial situations overnight. It’s not the default that counts but rather how you rectify the problem. If you keep making late payments, returning debit orders, or absconding from paying at all it sends a clear message. You have not tried to fix the problem and show no intent in doing so. Your creditors will respond with charging more interest and eventually legal action.
However, if you ask for help and work with a professional debt adviser it sends a completely different message. You are using the legal tools that you have available to rectify the problem. You have shown that you are aware of the problem and want to rebuild a positive relationship with your creditors.
By putting your hand up and saying ” I need help”- your creditors will respond with compassion and be open to negotiate further charges.
Professional debt advisers have years of experience negotiating with creditors. They are thus able to help you get a more lenient offer from your creditors. In most instances you can strike a better deal with their guidance than anyone without the knowledgeor skill will be able to.
Connect with a Premier Debt Network Adviser
We have professional debt advisers in our network ready to assist you with slashing interest on your outstanding bills.
If you are interested to learn more, complete the form to have a call with me. I will provide you with more information about a debt restructuring plan that can suit your needs. When you are comfortable, I will connect you with a debt adviser in my network for an assessment.
All people that connect with me on a call will qualify for a special Premier Debt discount. This will be explained to you in your call.
Please complete the form below and keep your phone close for my call. You can also give me a call on 021 780 1046 to discuss this article if you have any questions.
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Be well
Judy Hayes
Co-founder of the Premier Debt Network
