To suffering consumers: budgeting can ease those rate-hike blues

There’s no hiding place for consumers who are being lashed from all sides as a result of rising interest rates, sky-high prices of basic foodstuff and constant life-sucking electricity blackouts.

Some will be forced to dip into emergency savings, apply for additional loans or borrow from friends and family to make it through the month. But all that comes at a hefty price.

The repo rate recently hit a record of 7.75%, the highest since 2009. The prime lending rate, the rate at which commercial banks lend to consumers, has increased from 10.75% to 11.25% with effect from March 31.

If you are paying off a R160 000 Corolla Quest, your new monthly instalment is expected to increase by just over R40. For a R600 000 home loan, your bond repayments will now be higher by about R210.

All this hardship is proudly brought to you by the Reserve Bank’s five-member Monetary Policy Committee, who agreed on a 50 basis points increase to the repo rate.

Unfortunately, the ripple effects of the increases from last year are fast approaching consumers like a runaway train.  However, Tebogo Huma, a Bloemfontein, Free State-based personal finance coach, says there’s hope for consumers if they exercise a fair bit of discipline.

“My first word of caution is for people not to cancel insurance policies. One of my clients is still paying off a car that was stolen soon after he cancelled its insurance three years ago. If you are really pressed and do not have wiggling room, talk to your creditors. Business understands the tough economic environment we’re all under,” says Huma.

He urges South Africans to have frank discussions around the dinner table on household budgets and where the kindest cut can come from.  According to Huma, most of his clients have been using this formula to ease themselves out of debt. This includes drawing up a monthly budget and reviewing it bi-monthly  and maintaining  their monthly payments.

In addition,  they should  remove “luxuries” from  their monthly expenses and  turn their talent into a side hustle such as selling cakes if they are  great bakers or help pupils with maths and science for a fee if  they are good at it.

The last option, he said,  involves consolidating  loans into a single amount.

“If you can’t afford the increase, continue to pay the old rate and ask your creditor for a loan-term extension,” he says.

“Do not suffer in silence. There’s no shame in going to your creditor. Talk to a financial adviser and don’t leave it too late. Don’t ignore the bank’s or creditor’s phone calls.”

For more business news from Sunday World, click here. 

Follow @SundayWorldZA on Twitter and @sundayworldza on Instagram, or like our Facebook Page, Sunday World, by clicking here for the latest breaking news in South Africa. 

Latest News