Consumers, are you falsifying your income to Credit Providers?

There are several triggers for consumers to begin to create a false income. Most often the consumers do not even realise that they are doing this until a few months down the line and the cycle is difficult to stop without major intervention or debt review.

We as Debt Counsellors have seen this trend for a while now but this practice has hugely increased over the past 3 years in particular. The effects of the Covid-19 pandemic, job losses during this time, short time payments, spouses losing income, high inflation rates, increasing interest rates, electricity increases and fuel prices just to mention a few.
During the pandemic, the interest rate went down so significantly that there was a surge of consumers buying properties as well as vehicles. However, this was short lived as once the realistic effects of the pandemic hit, the interest rates increased and the consumers just could not afford the home loans and repayments as their salaries did not go up as quickly.

To alleviate the monthly expenses and arrears to creditors, consumers applied for additional Revolving credit loans, credit cards and short term loans. The new loans basically helped to pay the home loans, vehicle finance and filled in the gap between the incomes versus the monthly expenses.

Basically, if you earn R20 000.00 per month and your expenses now add up to R22 000.00, your additional loans will top up the R2 000.00 shortfall. The consumer then needs to live so will use the additional credit cards or RCP loans for the rest of the month. The end of month 2 the minimum payment due has now increased to R24 000.00 per month but the income has remained the same. More expenses are spread over the various credit cards and loans to cover the R24 000.00 and then more needs to be borrowed to be able to live. The additional used now adds up to R30 000.00 at the end of month 3 etc.

The credit has been used as an income to fill the short-fall in the income.
The consumers are now maxed out over a period of time and cannot get more loans so begin to pinch from Peter to pay Paul so the cycle of defaulting on creditor payments begins as well as missing payments to the home loans and vehicles.

Unfortunately there is no cure to this practice as the consumers are over indebted. The only solution going forward is restructuring of the debt and to reduce the interest rates over a set period.
The consumer does not have any other reasonable choice but to seek the help of a Debt Counsellor. – Cobus de Vos (Complete Debt Counselling – NCRDC1310)

Looking for a debt counsellor – go and check the link https://www.dcasa.co.za/debtcounsellor-search/