Am I Over-Indebted?

You pay one account and fall behind on another. You have taken a loan to pay a loan. Your salary is gone within days of payday. If this is you, you may be over-indebted, and you are far from alone. The good news is that South African law gives you options.

What is happening

Under the National Credit Act, you are over-indebted when your available income is not enough to pay all your credit obligations on time. It is not about how much you owe in total. It is about whether you can keep up with the monthly repayments while still covering basic living costs.

A simple way to check is your debt-to-income ratio: add up all your monthly debt repayments (excluding your home loan, if you want a stricter view) and divide by your take-home pay. If repayments take more than about a third, pressure is building. Above about half, most people cannot keep up without cutting essentials or borrowing more.

The law also expects lenders to check affordability before giving you credit. If a lender gave you credit you clearly could not afford, a debt counsellor or court may consider it reckless lending. Over-indebtedness is a financial situation, not a character flaw. It often follows a job loss, illness, divorce, a death in the family or rising costs.

Signs to notice

• You use one form of credit to pay another.
• Your overdraft or credit card is always at its limit.
• You get calls or letters from creditors or debt collectors.
• You pay only the minimum, and balances do not go down.
• You skip essentials like food or medicine to make repayments.
• Your account has been handed over or you have received a letter of demand.

30-second self-check

Answer yes or no.

• Do debt repayments take more than a third of your take-home pay?
• Have you borrowed in the last three months to pay another debt?
• Have you missed or been late on a repayment in the last three months?
• Are you using credit for food, transport or electricity?
• Do you get calls or letters about arrears?
• Would losing one month's income mean missing several payments?
• Do you avoid opening statements because you fear what they say?

0-1 yes: Your debt looks manageable for now. Keep your repayments under a third of take-home pay and build an emergency fund.
2-3 yes: You are under pressure. Act now while you still have choices: list your debts and speak to a money coach or debt counsellor.
4 or more yes: These are strong signs of over-indebtedness. You do not have to sort this out alone. Speak to an NCR-registered debt counsellor soon, before creditors take legal steps.

What you can do next

• Today: Stop taking any new credit, including store cards and 'instant' loans.
• This week: List every debt: creditor, balance, monthly instalment, interest rate and whether you are in arrears. Your free credit report will help you find anything you forgot.
• This month: Speak to a money coach or NCR-registered debt counsellor about your options, which may include negotiating with creditors, a repayment plan or debt review.
• If you receive a summons, do not ignore it. Get legal advice straight away.

Your tool

Debt Health Assessment - a private check of your repayments, arrears and borrowing habits that shows your debt-to-income ratio and suggests the level of support that fits.

When to get professional help

Get help if you are behind on payments, borrowing to repay, or have received a letter of demand, summons or garnishee (emoluments attachment) order. Debt stress also hits sleep, mood and relationships hard, and it helps to talk to a counsellor at the same time.
Who can help: NCR-registered debt counsellor, money coach, Legal Aid SA, counsellor

Getting help in South Africa

The National Credit Regulator (ncr.org.za) lists registered debt counsellors and explains your rights under the National Credit Act; always check a counsellor's NCR registration number. The Credit Ombud (creditombud.org.za) handles complaints about credit providers and credit bureaus. Legal Aid South Africa (legal-aid.co.za) may help if you face court action and qualify. Your Cleared Mind EAP offers counselling for the stress that comes with debt.