Paying more on debt all of a sudden, why?

South African consumers collectively rejoiced when the South African Reserve Bank (SARB) announced in September 2021 that an interest rate increase was put on hold and would stay firm at the record low of 3.5%. Between the rising cost of food, petrol, electricity, school fees and more, most South Africans were in desperate need of the financial respite that SARB offered. However, it seems that all good things must end. A recent announcement made on Thursday 18 November 2021 has declared that the interest rate has officially increased from 3.5% to 3.75%.

As a consumer, this interest rate increase will affect you in several ways. Essentially the interest rate increase now means that any (and likely all) payments that you owe to creditors will increase as well, resulting in you paying more on debt all of a sudden. These creditors include – but are not limited to – institutions with which you have a home or car loan, credit cards, personal loans and retail accounts. This comes as unwelcome news as South African consumers were desperately hoping to catch a break from high monthly instalments and potentially have access to more disposable income going into the festive season.

With most consumers already needing to stretch their income well beyond its limits to make ends meet, this increase also means that consumers are unable to support the struggling retail sector without putting themselves even further into the debt trap. Debtco Group predicted this interest rate rise back in September and advised our clients on how to prepare for an interest rate hike. Although the best defence against interest hikes is to prepare for the worst, very few South Africans can afford to budget in advance for possible increases. However, it’s never too late to get help.

If you are short-paying creditors, missing payments altogether or are in danger of doing so due to the interest rate increase and cannot see a way out, Debtco Group can help. Our expert team has years of experience assisting over-indebted consumers improve their financial situation through our Debt Counselling and Debt Review services. By providing budget advice and mediation with your credit providers, Debtco Group can help you avoid legal action from frustrated creditors and guide you towards making smarter financial decisions in the future.

For more information on Debt Counselling, please contact our team today for a free assessment.