One impact of COVID-19 on individuals is that many Ghanaians are drowning in debt. But many are doing everything possible to stay afloat. If you detect this scenario in your life and have creditors harassing you. Just know that you are not the only one at this table. As over 10 million people owe their debts, according to recent statistics from the National Credit Regulator. Debt administration is a better solution for your debt. You can find details on debt administration and its alternatives in this article.
What is debt administration?
In terms of debt administration, it is a procedure that reduces your instalments and extends repayment terms. This only happens when your overall debt amount does not exceed ₵50 000. Meanwhile, debt administrators will help you by deducting your living expenses from your income. Also, dividing the balance equally among your creditors. However, you only get administration approval from a court. Besides a court approval, no financial institution will accept you to be under debt administration.
Note: Upon the court’s approval, the debt administrator will assume responsibility for managing your finances. While creditors cannot take legal action against you.
How does debt administration work?
Under debt administration, it is essential that you continue to watch the statement closely. If something doesn’t seem to add up, ask questions. There is no legal requirement for debt administrators to be registered with a regulatory body. However, some overcharge or cannot pay creditors. It is the administrator’s responsibility to produce a distribution account every three months. Showing what you do with your money. Meanwhile, among the information in the account is how much you receive. Also, they deducted how much for fees and costs. Also, how much you paid out to each creditor. When you review your statements, you will ensure they haven’t overcharged you or aren’t getting deeper into debt.
Note: You may cancel debt administration if you decide it is not for you. However, a magistrate will need to be convinced that the reasons for your decision are sound and that you intend to pay off your creditors.
Features of debt administration
Before considering debt administration for your long outstanding debt. It is essential to note the features, weigh and accept them before applying.
- There is only a 15.5% interest rate reduction in credit providers.
- Indefinite repayment terms (meaning they won’t repay the debt until they settle the financial obligations) govern the repayment.
- The creditors only receive payment every three months (interest adds up, and they charge the creditors with various fees).
- This option is only available to debtors with debts of less than ₵50, 000.
- In addition, they will charge you 12.5% + VAT + distribution costs per month.
- Your employer will most likely find out about the client’s payment because they usually deduct it from your salary.
- As soon as your employer pays the designated amount to the administrator. Your employer also becomes entitled to another 5% management fee.
Why is debt administration risky?
A high probability of fraud exists because administrators do not require registering with a regulatory body.
Many administrator’s fees exceed the maximum 12.5%. They charge vast amounts or don’t settle with your credit card companies as supposed. However, you grow even more indebted, as you never settle your debts. The maximum debt administration order is also GH₵50,000.
It is difficult to determine whether administrators are trustworthy since there are no regulations. The risk you are taking by putting your finances in the hands of someone else is significant, given that debt administration involves your livelihood.
Is there another way to deal with debts?
National Debt Advisors offers professional debt counseling services through which it negotiates with your creditors on your behalf to reduce your instalments.
Therefore, you will have enough money to pay for your repayments each month, as well as to cover all of your living expenses. As a result, your credit providers can’t contact you or take legal action against you, which eases a great deal of debt stress.
Cons of debt administration
The disadvantages associated with debt administration in Ghana include:
- It can be quite expensive.
- They reduce interest rates to only 15.5%.
- In most cases, they extend repayment terms indefinitely.
- However, interest accumulates because they only pay creditors every three months.
- There are 12.5% in administration fees, as well as 13.5% in VAT.
- You cannot hide the payments from your employer, as they deduct them directly from your salary.
In case you’re feeling overwhelmed by your financial situation and struggling to regain control, the law is on your side. In order to eliminate the emotional strain of being in debt, it is important to take back control. With debt administration in Ghana, you can manage your debts appropriately. However, the good news is that most Ghanaians seem in control of debt better using debt administration. Therefore, signifying a mind-shift on borrowing money. However, few Ghanaians are taking out loans from banks, micro-lending providers, and family. Despite the increasing financial pressures because of the impact of COVID-19 on the economy.