An Alternative to Debt Consolidation to Increase Your Cash Flow

In boom times it is easy to find new loans and easy to service them because your house keeps going up in value and you could do a consolidation loan on your mortgage in no time to help you with your repayments.

Your living standards increased, because your cash flow increased. So with the increase in cash flow new luxury items were bought like bigger car and house with bigger loans. But now the boom has finally turned to bust. Interest rates went up and house prices went down. It has become more difficult to sponsor your life style with new loans, because the banks have tightened their lending criteria.

People start to have cash flow problems. New loans will be taken out to cover the cash flow short fall. But at some point you will not be allowed to take out new loans, because of affordability according to the banks. You need to find a way to increase your income or lower your monthly expenses. One of the ways to cut living cost is to changed your spending habits. The problem is that if you have improved your living standards to a bigger house and car, you might find that these large ticket items are difficult to sell in a recession or declining market. In the current market there are no buyers for items that need finance. The buyers have disappear and you are now left with your expensive assets and with very high monthly payments to the bank.

To find a new loan every time you need money to pay for your current loans, is not the answer. The new loan will not last long and before long you will have more debt to repay over a longer period of time which is not a much better situation.

The new National Credit Act(NCA) gave us a new alternative, namely debt counselling. Instead of applying for a new loan to cover your short fall, you can take responsibility for you debt and apply for debt counselling in South Africa. Debt counselling South Africa will allow you to negotiate lower payments on your monthly payments to creditors with the help of debt counsellors that are appointed by the national Credit Regulator.

You will be protected from your creditors while in debt counselling. You will not be allowed to spend money on luxuries and you will have to live according to a strict budget. Your debt counsellor will negotiate a payment plan twith your creditors that you afford to pay each month. You will make one payments to the Payment Distribution Agency each month and the PDA will pay all your creditors. You will not be allowed to borrow money or use your current credit cards and store cards.

Your debt counselling status can end in two ways. The first will be when you have repaid all your debt. The second way will be if you end it yourself. That will be when your personal situation changes so that you are able to make full repayments to all your creditors. They will have no reason to take legal action against you, so you don’t need the protection from debt counselling any more.