Approach debt with the right attitude and regain financial health

Debt can be a good thing if you are a responsible borrower and use trustworthy lenders to help you achieve your personal goals. 

Borrowing money so that you can create a flashy lifestyle, without worrying about where the money comes from to repay the loan, can have serious consequences. 

This includes derailing your long-term plans for years, says Jan Moganwa, CEO of Old Mutual Finance.

The link between responsibility and credit is that credit requires you to commit future income against something you buy today. This is true for most of us who spend money we haven’t yet earned on a car, education or home. 

It’s better when the loan you need is part of a financial plan and budget, but even then things can go wrong. That is when you need to step up, accept that you must solve the problem and steadily work your way back to financial health. If you obtained the credit from Old Mutual Finance, the chances are the financial service providers will help you get back on your feet, says Moganwa.  

“Old Mutual Finance takes it a step further and offers financial education. This is done through a partnership with Octogen, a financial wellbeing and debt review service provider, registered with the National Credit Regulator, who offers debt review services, among other things. 

“We live in uncertain times and there are customers who find they can’t pay their loans. A responsible borrower, who acts first and approaches Old Mutual Finance with a money problem, will always be heard. Old Mutual Finance can help with debt consolidation to assist in resolving problems,” says Moganwa.

Here are four benefits to consolidating your debt in a single loan:

1. With just one repayment every month, it’s easier to manage your debt;
2. Having one loan means paying one monthly administration fee;
3. You will have the opportunity to get rid of revolving credit that has stuck with you for years; and
4. You have the option to lengthen the time needed to repay your debt, lowering your monthly instalments.

However, it is also important to note that even though lengthening your loan term can lower your monthly instalments, restructuring your debt this way will result in more interest and fees paid over the life of your loan.

Spending money before you earn it is always something that must be planned. Problems usually occur with short-term, unsecured loans, granted without any form of asset backing them, that many in SA take out for the lifestyle benefits, rather than essential reasons.

It is here that Old Mutual Finance helps its customers, says Moganwa. Old Mutual Finance assists by:

• Referring to your credit record to see how financially responsible you are. Your record will indicate whether you are consistent in making your payments or not; 
• Looking at how many loans you have, what percentage of your salary goes to paying instalments, and whether you will be able to pay off another loan with what remains of your income; and
• Deciding whether to accept or reject your application.

“Rejecting an application for a loan may not be considered helpful. However, if Old Mutual Finance rejects your application, it is probably a warning that another loan could push you into a world of debt that can’t be paid, and many hours and nights of worry. If a loan is rejected, this should be taken as a sign that it’s time to check on what you owe and begin planning how to avoid a financial crisis.

“Using credit in a way that results in you owing more than you earn every month is a mistake made by thousands of South Africans every year. Mistakes, however, can usually be fixed and are also learning opportunities. It is people who realise this and approach Old Mutual Finance for help, that put themselves on the road to recovery and a better, brighter future,” says Moganwa.

“If you act quickly, move to discuss your problems and seek solutions, something can usually be done to assist. Responsibility is, after all, a matter of attitude and people with the right attitudes usually win personal battles.”

^{Old Mutual loan offerings are made available through Old Mutual Finance (RF) (Pty) Ltd, a licensed Financial Services and Registered Credit Provider NCRCP35.}

This article was paid for by Old Mutual Finance.