When the National Lockdown was implemented in late March, President Cyril Ramaphosa announced a set of measures to assist consumers during the predicted period of economic disruption. Some of these interventions included a 3-month payment holiday in which home loan and vehicle payments (among others) were suspended between April and June. This payment holiday will come to an end in July, but some consumers may still be experiencing cash flow problems. What are their options?
For consumers in good standing
Will consumers who opted for the 3-month payment holiday be able to ask their banks or credit providers for further relief if their income is still being affected due to the lockdown?
If you took advantage of a 3-month payment holiday from April to June, your payments will be due again from July. It is important to note that during the payment holiday, interest and fees were added to your debt by the credit provider and if your repayment remains the same from July onwards the repayment term will increase by 4 to 6 months depending on the interest rate. This means that the credit provider recovers all the interest and cost linked to the payment holiday.
Some credit providers added an additional loan to cover the 3-month term. If this is the case, you are required to repay normal payments from the end of the payment holiday as well as the repayments of the additional loan.
At the time of publishing this article, credit providers have not announced any additional relief yet and it might be difficult to repeat the offer.
For consumers under debt review
No payment holiday was offered to consumers under debt review. In cases where consumers in debt review experienced cash flow problems as a result of Covid-19, they were encouraged to approach their debt counsellor with the required proof, and ask the debt counsellors to contact the credit provider with a defined proposal. Where this was accepted by the credit provider the payment change was implemented by the debt counsellor. These terms will determine the payment plan going forward.
For consumers not in good standing
Currently, there are 13 million consumers who experience cash flow problems, which means they are not in good standing. If you are one of them and did not receive financial relief over the Covid-19 intervention period, and you’re anticipating that your income will continue to be negatively affected for some time still, what options are available to you?
If you were unable to catch up with arrears payments or make payment arrangements, credit providers may commence with legal action by sending out a Section 129 notice. Where this happens, you have a right in terms of the NCA to contact a debt counsellor for assistance.
We encourage you to contact Octogen for a free budget assessment to determine possible options to deal with the problem. For more information, you can take the Octogen Covid-19 Financial Relief Options Quiz.