Struggling to pay a debt? Your options: credit insurance vs debt relief holiday
Covid-19 and the nationwide lockdown to slow down its spread is obliterating the economy.
South African consumers – already highly indebted before the outbreak – will face severe hardships in the months and years to come.
Many will lose their jobs and their ability to service their loans.
There are two options you may want to consider at this time:
Access credit insurance
Debt relief holiday
You may not realise it but – if you took out credit - it’s likely that you have credit insurance linked to the loan.
Credit insurance (aka a “credit life policy”) is a policy that pays your debt if you die or become disabled or, sometimes, if you get retrenched.
Every credit insurance policy is different; check your terms and conditions.
Most credit providers in South Africa has by now launched various Covid-19 “debt relief holidays” whereby repayment terms are extended and/or repayments are halted for a period.
The Money Show’s Bruce Whitfield asked personal finance journalist Maya Fischer-French about the pros and cons of dipping into credit insurance versus opting for a debt relief holiday.
Whitfield also spoke to FNB Life CEO Lee Bromfield.
If you take the payment holiday… it adds the capital amount you must pay off. It’s not a freebie… Credit life insurance… it’s been abused previously… people don’t even know they have it… Check if you have credit insurance… you most likely have it!Maya Fischer-French, personal finance journalist
Only African Bank sent out a press release saying credit life insurance is available…Maya Fischer-French, personal finance journalist
Credit life has been around for a bit. It’s embedded in our processes… we’re looking at contacting all our customers… how they can claim… We prefer our customers not to go into further debt…Lee Bromfield, CEO - FNB Life
For more detail, listen to the interviews in the audio below.
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