If you are one of the people being squeezed by the punitive interest rates the banks are charging, don't panic, your bank is not about to rush out to take away your home, your motor car, or even that new dining room suite your bought on hire purchase.
The banks and other lenders are concerned about the position and are offering to help you through any embarrassing financial situation you may find yourself in right now.
This is in their interests as much as in yours.
It is a costly process for banks to repossess and they would prefer to leave your assets in your hands.
Standard Bank, for instance, has made an offer to defer the additional interest payments on home loans.
You will be able to retain your monthly instalment at current levels for nine months. Thereafter you will be able to repay the deferred amount over 18 months.
The deferred interest will not be added to your existing capital loan so you will not be paying interest on the outstanding interest as normally happens. To qualify you should not have been in arrears in your payments over the past six months.
Peter Southworth, general manager, retail products at Nedcor Bank, which includes Nedbank, Permanent Bank and Peoples Bank, says there are several options for people who find they cannot meet the higher interest payments.
The various options available to home loan clients include:
* Interest only payments, where no capital amount is repaid. This means you would, after a brief period, have to increase repayments to ensure you paid back the capital within the loan period;
* Extend the contract term of the loan, for example from 20 to 30 years. This option on a R100 000 bond (at 21,5 percent) will lead to an additional interest charge of R210 000 over the life of the loan and only slightly decrease the monthly repayment by R22,61 a month. This is a costly alternative; and
* Reschedule debt. Again this should be seen only as a temporary measure until interest rates stabilise as it may have a significant impact on the extra debt burden.
Southworth says it is not always in the best interest of the client to allow debt to increase by maintaining payments at the old interest rates.
"A better alternative is to cut back on discretionary spending in order to service existing debt."
Along with other banks, Southworth says his bank is "highly sympathetic to the financial difficulties that a number of our clients are facing in these turbulent economic times, and we will assist them wherever possible to carry any additional repayment burden they may have".
If you have a problem do not do nothing and hope the problem will go away.
If you are in trouble speak to your bank.
The bank, in attempting to help you, will want to know all about your financial affairs such as how much debt you have, what you spend every month and how much you earn.
Southworth says with this type of knowledge your bank could, for example, advise you to consolidate existing debts as much as possible, as this allows easier control and management of debt, both for you as well as for creditors.
"It is only once all options have been exhausted that we would advise clients to consider selling some of their assets."