An Alternative to Debt Consolidation to Increase Your Cash Flow

In boom times it is easy to find new loans and easy to service the loan. The reason is that your house keeps going up in value. This allowed you to do a consolidation loan on your mortgage from time to time. This increased your cash flow so that it was easy to make the monthly payments to creditors each month.

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. But now the boom has finally turned to bust. Interest rates went soaring and house prices slumped. New loans to sponsor your life style become harder to find, because the banks have tightened lending criteria.

The problem that people are facing is a cash flow problem. As soon as there is a cash flow short fall, new loans will be made to help pay the current creditors. Soon or later you will not be able to take out new loans, because of affordability according to the banks new criteria. You need to find ways to increase your income and lower your expenses. One of them is to cut living cost and changed your spending pattern. 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 big ticket items like houses and cars. The buyers have disappear and you are now left with your expensive assets and with very high monthly payments to the bank.

It is not the solution to your debt problem to go and find a new loan to cover your shortfall on current loan payments. 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. People should not apply for a new loan to cover the short fall. They should take responsibility for their 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 taking you to court while in debt counselling. You will not be allowed to spend money on non essential items and you will have to live according to a strict budget. Your debt counsellor will negotiate with your creditors a payments plan 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 take on new credit like use your current credit cards and store cards to buy goods.

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.