How to Manage Debt While you’re Unemployed

The covid pandemic led to a huge economic breakdown which has an impact on mass unemployment. Many South Africans have struggled financially over the past few months and are relying on debt to help them through these difficult times. To make matters worse many individuals were in debt before becoming unemployed. If you’ve found yourself in this position, how do you continue managing your debt?

If you’re recently unemployed with a pile of debt, you need to assess your situation and create a financial plan. Making the wrong financial moves can put you in a worse financial position and damage your credit score. But if you make smart financial decisions you can stay on top of your financial game. 

Know your rights 

Depending on your circumstances, you may qualify for unemployment benefits which will help you get by until you find a job. The Government has helped thousands of South Africans through the UIF unemployment benefits fund.

If you qualify for the UIF fund you may receive a minimum of R3500 to a maximum of R6638.40 per month. This amount might not be enough to cover all your monthly expenses, however, every small amount counts when you’re unemployed. 

The UIF fund will only be available to those citizens who have contributed to the fund while employed. You will not be able to claim from the fund if you have resigned, been suspended or absconded from your work. You will claim for the fund if the Commission Conciliation, Mediation and Arbitration (CCMA) considers your resignation as constructive dismissal. 

To benefit from the UIF fund you must register as a work seeker with the labour centre. You’ll have to apply for UIF benefits within 6 months of being unemployed. 

If you require more information click here.

Set Up an unemployment budget 

One of the most important things you should do when you’re unemployed is to set up a budget. If you haven’t created a budget before, now is a perfect time. Figure out where you can trim your costs temporarily while you’re unemployed. You may need to spend less on groceries, food deliveries or clothes until you start earning more money again.

It might be a good idea to prioritize your debt repayments before your other expenses so that you don’t fall behind on payments. If you don’t pay your monthly debt repayments, your credit score will decrease and you’ll end up in more debt due to the interest rates. Continue making the minimum debt repayment amount for as long as you can. 

If you can’t afford all your repayments, you may need to prioritize your debt repayments according to importance.

Reach out to creditors

If you’re struggling to afford your monthly debt repayments, ask your creditors how they can assist you during this time. Some creditors will offer a repayment holiday if you have been paying your bills on time every month. Other creditors may temporarily reduce your repayment amount. The best way to find out how your credit can help is by reaching out and making your creditor aware of your situation. 

Alternative methods 

In some cases, consumers find themselves deep into debt by the time they find a new job. If you find yourself in this position you might need professional help. We suggest debt review. 

Debt review is a statutory legal process introduced in 2007 by the National Credit Act (NCA) to help over-indebted consumers. 

Debt review is ideal if you’re struggling to cover all your monthly expenses alongside your debt repayments. The debt review process helps over-indebted consumers with their repayments, by reducing your monthly debt instalments. Paying a lower amount will free up some cash for other monthly expenses such as groceries, mortgage, car payments, school fees etc. 

When you’re employed again, and if you find yourself still struggling to cover all your monthly debt repayments, you may be over-indebted. Leave your contact information in the form below and one of our friendly consultants will contact you as soon as possible. 

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We look forward to the opportunity to get you debt-free!

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