GET OUT OF DEBT TIPS TO HELP YOU REGAIN FINANCIAL CONTROL
Rising living costs, medical emergencies, and fuel price increases are among the reasons you may have fallen into a debt trap. Regardless of the reason for your financial situation, you can get out of debt by following the tips to get out of debt below.
GET OUT OF DEBT TIPS – HOW TO GET STARTED
Gather information about your current financial situation by taking the steps below.
LIST YOUR DEBTS
List your debts according to the totals owned, monthly repayment amounts, and interest payable on each. You now know what you are up against.
LIST YOUR MONTHLY INCOME STREAMS
If you have more than one income stream, you can decide which one to push in order to increase earnings. If you only have one income stream and work for a salary, you already know what you have in terms of income.
LIST MONTHLY EXPENSES APART FROM DEBTS
List expenses, such as school fees, utility bills, fuel, groceries, domestic worker, gardening services, satellite television, telecoms, club membership fees, and the likes.
CALCULATE WHERE YOU CAN SAVE
First, calculate where you can cut monthly costs. You may reduce luxuries, such as expensive clothing and entertainment; buy food in bulk to save; and eliminate fast-foods from your budget. Once you have calculated where you can save, you know how much money you have extra to pay on debts.
ONE OF THE MOST IMPORTANT GET OUT OF DEBT TIPS: TAKE ACTION
Though you may be tempted to pay off one debt at a time, keep in mind that should you apply for voluntary sequestration within the next six months that this practice can count against you. Indeed, you may not benefit one creditor over another. As such, rather pay extra on all your debts. This will help to reduce interest payable on the debts.
If you have calculated that even after you have taken steps to reduce your expenses, and are still unable to pay your debts, consider a debt consolidation loan or debt review.
MORE GET OUT OF DEBT TIPS: YOU COULD TAKE THE LOAN ROUTE
With a debt consolidation loan from a reputable financial institution, you can pay off all your credit cards, personal loans, overdraft facilities, and store accounts. However, make sure the loan is offered at a lower interest rate than any of the debts. If the loan is for R100 000, you pay interest on R100 000. Your credit card may only be R20 000 at a high interest rate with some of the other debts at reasonable interest rates. Calculate whether the consolidation loan is affordable and at a reasonable rate. If all your debts can be paid using it, and you can stay financially disciplined, it can be a workable solution.
DEBT REVIEW AS A SOLUTION TO GET OUT OF DEBT
If you have a monthly income and your debt is more than R50 000, you can consider debt review. With this solution, you are placed under debt review, and creditors cannot take further legal action against you. The debt councillor negotiates lower interest rates and more affordable monthly repayments. You pay a consolidated monthly amount, and the creditors receive their benefits according to the court order. It will take longer to pay off the debts, but since you cannot enter any credit agreements during the period, you slowly get out of debt.
IF ALL ELSE FAILS, WHAT IS LEFT?
If you find that even under debt review, you still struggle to pay the debts, you can consider voluntary sequestration. It is also a suitable solution if your debt cannot be paid back within five years under debt review. You apply for voluntary sequestration, and all legal proceedings against you are stopped. Your estate is surrendered, and a court-appointed trustee oversees the management of the estate. Assets are sold and proceeds distributed amongst the creditors according to the requirements of the Insolvency Act.
You may only enter credit agreements with the written permission of the trustee. The creditors must receive a minimum of 20 cents from the rand, and as such, up to 80% of the debt can be written off. You stay under sequestration until rehabilitated.
Get legal advice on the best solution for your debt situation, and follow the tips above to take the first steps to get out of debt.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.