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MONEY CLINIC | My payment arrangement with my bank has gone up and I can’t afford it anymore

Close up of unrecognizable senior woman doing finances at home.

A pensioner who made a payment agreement with her bank has since learned that the agreed amount has increased and she can no longer afford it. She writes:

I am a 65 year old state pensioner (receiving R1,900 per month). I lost my last job due to the Covid-19 pandemic in March 2020. I am married by prenup, and having been laid off three times since the age of 50, I no longer have a pension. nor investment. I currently sew and I don’t earn much money.

I have a current account with an overdraft of R6,000 with my bank, which I have managed for many years. I also have a credit card with the bank with a limit of R36,000. Both are max.

I recently approached the bank to ask if they could merge my debt and allow me to pay it off at an affordable rate, but they informed me that they were doing no such thing. They suggested I pay one account at a time.

So I asked for my credit card to be frozen and we agreed that I would pay R895 per month for five years. My installment would be R600 and the rest would be finance charges. I have since discovered from my statements that my installment has increased to just R403.27 per month, plus R463.44 in budget finance charges!

My bank has since sent me the new SA Reserve Bank terms and conditions, which in a nutshell state that I either have to pay increased insurance and fees or meet my debts – of which I am not a position to honour.

Sebastien Alexanderson – CEO of National Debt Advisors respond :

This sadly represents the grim reality for so many of us living in the new world of what we hope will be the end of the Covid-19 haze. Over the past two years, we’ve learned to live with less, to want less, to tap into our deepest breaths as we come to terms with the new normal and what it means for us financially. Thus, many of us took advantage of the payment holidays granted to us by the banks to extend the deadlines in order to help in the interim.

But that holiday is over and we’re seeing some very aggressive fundraising tactics in place again. If you’re behind on your debts, you’ll know what I mean. As always, knowing your debt rights is extremely important. If you had been laid off during Covid-19, your debts would most likely have had some type of credit life insurance that would have helped make repayments while you searched for a new job. Changing the terms of this arrangement will no doubt take this risk into consideration when considering the repayment plan and associated fees.

Talking to your bank about these fees when making a decision is key to understanding what is the best thing to do. Of course, you have the right to shop for credit life insurance and as long as you can offer equal benefits and protection; some clients have seen savings of up to R500-700 on their debt portfolio – it’s a bit of work, but well worth it.

Alternatively, you can talk to a debt adviser – ideally when the problems start or soon after. Wait too long and even a debt counselor might not be able to help you. But a debt counselor will renegotiate payments, seek cheaper insurance, and take on legal battles.

Questions may be edited for brevity and clarity.