JOHANNESBURG – For most people, accruing some debt is a reality at some point in our lives. None of us are immune to changes in our financial situation. Money problems that arise from unexpected expenses, job losses, illness, divorce, poor performing investments and the general downturn in the economy can all take their toll on our financial well‐being.
According to the National Credit Regulator (NCR), South Africans are over‐indebted. Even ‘good’ debt, such as investing in a property that could potentially increase an individual’s net worth, can leave the average wallet stretched well beyond what they can afford. More prevalent though is ‘bad’ debt. Characterised by borrowing money to purchase depreciating assets, South Africans are struggling to keep up with repayments. Of the 25 million active credit consumers in SA, 10.23 million or 40% of these consumers are behind on their payments.
Unfortunately, the sound financial advice to not go into debt to buy items that don’t go up in value or generate income is often disregarded. And whether it’s ‘good’ or ‘bad’ debt, consumers rarely calculate the impact of debt on their personal well‐being. But, as many of us already know, borrowing from future income to pay back debt over a long period is costly, not just in terms of money, but in terms of our mental health and quality of life, too.
The biggest flaw in the lender model is that credit encourages people to spend more than they can afford. The 10+ million consumers who live with the daily stress and anxiety of being unable to meet their repayment commitments are likely to be caught in a continuous downward spiral of more debt. A study by the University of Nottingham found that people who struggle with debt are twice as likely to suffer from depression resulting in those same individuals turning to retail therapy to relieve their depression. That is a double whammy!
While many over‐indebted consumers regret their decision to borrow money or buy on credit, the reason they initially committed themselves is often due to their inability to make an immediate purchase for high ticket items. And in a world that prioritises convenience and immediate gratification, what are the options for consumers who want to furnish their homes, for example, but don’t want to wait an extended period to save for these items?
For most, the answer to avoiding debt is by adopting an alternative and less well‐known consumer lifestyle such as Teljoy’s rent‐to‐own. To mitigate some of the economic volatility that we all face, Teljoy has recognised that what consumers need is flexibility to adjust their spend in accordance with changes in their finances. The rent‐to‐own model differs from conventional credit offerings because consumers are not bound to a long‐term repayment contract with the retailer.
With this is mind, Teljoy rent‐to‐own gives consumers who are permanently employed with a clear credit record the ability to buy essential home electronics, appliances and furniture immediately on a month‐to‐month contract. Unlike traditional credit offerings, Teljoy’s customers can upgrade, downgrade or cancel at any time to accommodate changes in their financial circumstances. Consumers don’t have to worry about delivery-fees, set-up and maintenance fees etc. are all taken care of. Additionally, rent-to-own is not impacted by fluctuating interest rates.
With no long term, fixed repayment contracts and liability for monies owed on items that have been repossessed, rent‐to‐own is a viable option for consumers who want to avoid and liberate themselves from the stress, worry and fear that results from debt. Especially because, unlike hire-purchase, rent-to-own does not at all involve the risk of getting blacklisted (or listed on the credit bureau as a bad payer).
These benefits in turn, can lead to a noticeable improvement in mental and physical health. With Teljoy, consumers can make a healthier financial decision to enjoy creature comforts and home essentials that all in all, improve their quality of life.
Rami Sassen is the chief executive of Teljoy.