Jul 22, 2020

JustMoney survey reveals debt distress and payment holiday take-up

Article by JustMoney

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A dipstick survey by personal finance website, JustMoney, has revealed that a third of their readers would be in severe financial distress if they were not offered payment holidays, and a similar number would experience financial distress when their payment holidays come to an end.

Payment holidays – when you take a short break from your repayments on a credit agreement such as a loan or bond ‒ have been one of the lifelines that lenders have offered customers who might be floundering in the wake of the COVID-19 pandemic. 

To see the various options available from five major banks, see debt relief options

Close to 1,400 JustMoney readers answered six survey questions in June. Read the findings here. The key takeaways were: 

  1. 50% are not considering taking a payment holiday.
  2. 69% were not offered a payment holiday by their banks or creditors.
  3. More than 60% were not taking a payment holiday for any of their accounts.
  4. 27% said their payment holiday was three months and more.
  5. 33% would be in severe financial distress if they were not offered payment holidays.
  6. 36% would experience financial distress if their payment holiday came to an end. 

Relief plans 

Examining the feedback in more detail, JustMoney Commercial Manager, Sarah Nicholson, said that close to 50% of participants said they were not considering taking a payment holiday for the accounts they have with their credit providers. Besides this, 22% said they were definitely considering the relief plan, while 17% of readers said they were not sure. 

When asked whether they were offered a payment holiday by any of their creditors, 69% said no, and 31% confirmed that they were indeed offered a payment holiday. 

Regarding the number of accounts they were going to take a payment holiday for, more than 60% said they were not taking one for any of their accounts, while just over 18% said they would apply for only one account. 

Around 12% of readers said they were going to need a payment holiday for two of their accounts, while close to 5% said they were taking a payment holiday for three accounts. Close to 2% said they were taking for four accounts, and another 2% said they were taking for five and more accounts. 

When asked how long the payment holidays were that they had been offered, about 8% of readers said this was for one month, nearly 8% said it was for two months, and 27% said it was for three months. 

Financial stress 

“Our readers were also asked to rate the severity of their financial stress on a scale from one to five if they were not offered a payment holiday – with one meaning “limited” and five meaning “severe”. Approximately 16% of readers rated one; 6% rated two;  11%, 12%, and 33% rated three, four and five respectively,” said Nicholson. 

“We also asked our readers whether they were concerned that they’ll experience financial distress again when their current payment holiday ends. To this question, 36% said they’ll definitely experience financial distress and 28% of readers said no.” 

Nicholson said the survey confirmed the pressure that many South Africans are experiencing, but also showed that many are doing their best to maintain payments. 

“If you can possibly afford to carry on making payments as normal, then certainly do so. Payment holidays often only delay the pain – you still have to service your debt. If you are struggling financially, it is important not to miss or change payments without discussing this with your lender in advance. Both parties must understand one another, and get the amendment in writing. Keep in good standing with your lender and you will be in a better position to negotiate. 

“A payment holiday may sound appealing in the short term, but could well come at a high cost later. Make sure you understand any altered conditions. Banks and other lenders, like most other businesses, are also under strain because of the pandemic and need to ensure they will survive.” 

Dealing with debt 

For those who feel overwhelmed by debt and unsure of where to turn, debt counselling or consolidation could be an option. Debt consolidation involves paying one affordable monthly payment over a longer period, instead of multiple repayments. It offers more breathing room and protects assets from repossession. You can access a JustMoney guide on various debt rehabilitation solutions here.

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