Avoid the demon of debt this year
File picture: Philimon Bulawayo/Reuters File picture: Philimon Bulawayo/Reuters
Cape Town - Deeply indebted consumers should not sway from their budget by taking on unnecessary debt on goods they don’t need this festive season.
This is according to Neil Roets, chief executive of Debt Rescue, who said indebted consumers already owe more than R1.71 trillion in outstanding debt.
Roets said many consumers had already maxed out their credit cards and store cards during last month’s Black Friday and Cyber Monday and were now thinking of borrowing money from lenders in the form of unsecured loans to fund their Christmas spending.
“Unless you have budgeted for Christmas presents and New Year’s goodies, think twice about increasing your debt load. While it is true that some retailers have great specials going on over the holiday season, the reality is that loans have to be repaid, mostly at very high interest rates, and there are substantial expenses waiting down the road in January and February in the form of school fees, university payments, school uniforms and much of the debt that had been stacked up in November.”
He said South Africa had received two downgrades from ratings agencies, which is going to further push up interest rates on borrowed money and would also impact on the economy in the form of slower growth - as low as a half a percent this year - and further unemployment.
“Those of us lucky enough to still have jobs may not have them for very much longer because with very little foreign direct investment coming into the county, it is unlikely that next year will see much of an improvement in any of the major financial indicators. We know for sure that inflation is on the rise and there is definitely going to be a substantial increase in the price of fuel, perhaps by as much as 40c a litre. Red meat, chicken and eggs are already on the rise and thanks to the widespread outbreak of bird flu, the price of eggs, a cheap source of protein for many, is going to increase substantially.”
Roets said, in short, things are going to get a lot tougher before they get better and now is not the time to spend recklessly.
Aasiya Jamal, Al Baraka Bank’s senior manager for transactional banking and customer service, said that with the onset of the summer holiday season, the bank had urged people not to over-extend themselves financially, whether in terms of making big purchases or taking expensive holidays, and to exercise extreme caution to avoid being defrauded or robbed of their money and bank cards.
Rudolf Mahoney, head of brand and communication at Wesbank, said during the festive season, many people and families embarked on annual holidays away from home, a practice that can attract high, and sometimes unplanned costs.