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3 secrets to getting out of debt

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“You can’t spend your way out of a recession or borrow your way out of debt.”

~ Daniel Hannan

Debt is a huge burden that cannot be taken lightly. For many South Africans, debt is a means of survival.

  • 4 million South Africans are credit active consumers.
  • 04 million South African consumers have bad records and our economy will not reduce the financial burden on consumers anytime soon.

This year has seen exponential changes in the way consumers survive financially. Even a third of South Africans do not save on a regular basis. With so many corrupted documents in the homes of many working South Africans, a financial crisis is looming. Over-indebtedness and lack of action will leave many South Africans with life-changing consequences.

The psychological impact of financial stress can alter mood and behavior. It also forces us to take financial risks, such as a payday loan, in hopes of even a momentary respite. Negative actions are the immediate reason for the need to get rid of the financial burden of debt. It can destroy a family and destroy healthy relationships. It will also affect your daily work.

Duties should be handled carefully. You don’t have to carry the nightmare into your life. Fortunately, the NCA has made provisions for over-indebted South Africans. There are many options available to you to help you get out of the debt trap. These options are not going to remove debt overnight. But they will relieve the pressure and stress, allowing you to live a healthy and happy life without the daily stress caused by debt.

1# Get out of debt: Snowball vs Avalanche

If you have enough money to manage all your debt payments, but you want to get out of debt once and for all, then these two methods are for you.

NB To get out of debt, we need to make more minimum payments. We also need to end the use of debt together. Otherwise, your efforts will not help you get out of debt.

Make all of your minimum debt payments each month, but focus the extra money on specific accounts each month.

The snowball method works by paying off the smallest balance first. The goal here is to motivate yourself with quick wins. Once that debt has been paid off, you move on to the next smallest balance, using the money you would have received from the closed debt to pay off your debts faster. The Snowball method works from the smallest to the largest outstanding balance.

The Avalanche method works by paying off the debt with the highest interest rate first. The goal here is to pay less interest each month and more toward your actual balance. Once you pay off the bill with the highest interest rate, move on to the next debt with the highest interest rate, and so on. The avalanche method works from the debt with the highest interest rate to the lowest interest rate.

Remember that you need to pay off all the debt. If you can’t manage your current payments, let alone additional repayments, the second option may be the best way to go.

#2 Get out of debt: One affordable payment per month

If you’re struggling to make all of your payments each month, debt counseling has helped thousands of consumers reduce their payments to earn extra income to live on.

Debt counseling allows you to pay off all of your debt in one affordable monthly payment. The process is simple and protects you from being blacklisted. You must be employed and have enough debt to make the process worthwhile for you.

Again, you will need to stop using the credit. The only way to get out of debt is to stop making debts.

If you feel that you are in debt, please contact Debt rescue and one of our debt counselors will carry out a free assessment. In this assessment, you will be able to get a reduced installment estimate based on your income and expenses.

#3 Get Out of Debt: Consolidation Loan

Consolidation loans are an option, but we don’t recommend them if you have excess debt. They work for some, but many of us just end up in debt despite our best intentions. With a consolidation loan, you borrow money to pay off all of your debts. You then make one payment towards the new loan. Consolidation usually comes with an exorbitant interest rate. And the criteria are quite strict. Unfortunately, consolidation loans take longer to pay off and you end up paying a lot more.

Review your expenses, debt repayments, and income to help you decide which option is best for you. Set a strict budget to see where you can free up some income. The best option depends entirely on how much you can afford to pay.

If you can afford the extra payments, use the snowball or avalanche method. If you are unable to make the minimum payments, it may be worth looking at your legal rights when it comes to credit and affordability through debt counselling. If you have several small debts and you want to consolidate them into a single small loan, but you have no debt and are in good standing with your creditors, a consolidation loan can help you get your finances in order.

Since 2008, Debt Rescue has been on the front lines helping over-indebted South Africans. Debt Rescue has been able to help thousands of consumers gain financial freedom through the debt settlement process. Contact us now to see how you too can affordably manage your debt.

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