A Few Tips on How to Get Out of Debt
Over-indebtedness is more widespread in South Africa now than at any time previously. Having enjoyed the boom years of an economy when credit was freely available and far less costly, it has been all too easy to develop the habit of buying things now and only paying for them later. Almost overnight, a global economic recession marked the end of those heydays for borrowers. With soaring interest rates and banks reluctant to extend loans, many South Africans are now unable to pay all their bills, lack cash to live on after paying those that they can, and are constantly faced with reminders or threats of legal action from creditors. For most, this has meant sleepless nights spent wondering just how to get out of debt. Here are a few tips that should prove helpful.
Stop Borrowing
Providing things haven’t escalated too far, there are several steps that one can take to alleviate the problem. Of these, the first and most important is to avoid any new credit. Using a store card or credit card for a purchase is not just far too easy; it is also clear proof that you can’t afford it.
Set a Budget
It’s simple enough. Just total your repayments, subtract this from your income and allocate amounts from the balance to each of your basic day-to-day needs such as food, clothing petrol and entertainment. If you overspend on one, you will need to cut back on another, so food and petrol will need to take precedence over clothes and movie tickets.
Focus on Needs, not Wants
You need a lunchtime snack but have always enjoyed popping out for a pizza or a burger and a tea. A big part of how to get oneself out of debt involves making small sacrifices. A homemade sandwich and a teabag should be quite enough to meet your needs – less fun maybe, but a whole lot cheaper.
Appeal to your Creditors
Most businesses do not really want the inconvenience of court proceedings. By declaring your difficulties upfront, they will normally agree to accept lower monthly payments spread over a longer period.
Check Interest Rates
The higher the rate, the bigger the debt, so focus on higher-interest items such as credit card balances and less on the rest.
Consolidation
A consolidation loan could be a way to get out of debt quite quickly. The loan is intended to pay off all creditors and leave you with a single monthly loan repayment at a favourable interest rate.
Sometimes such measures are simply too little, too late. At such times, let Insolvency Care help you make a plan to get out of debt.