You get your classic New Year’s resolutions: Go to gym more, be nicer to colleagues, eat more vegetables. One important resolution that is often overlooked is taking control of your finances. How about a resolution to pay back debt? Finances play a big part of our lives and it is easy to sweep financial issues under the rug.
Everyone wants to have enough money to pay for necessary living expenses and potentially save some money each month. Unfortunately, this is easier said than done.
South Africans Are Deeply Over-Indebted
According to the World Bank, South Africans are the World’s biggest borrowers. We tend to fund our lifestyles with easily available credit. Once we get a taste for credit we naively rack up plenty of personal loans, use multiple credit cards and open accounts at several stores.
Before you know it, 78% of your net income is going towards repaying debt. This is the average debt/income ratio that Vantage Debt Management sees from the consumers that approach them for help.
Almost half of all credit-active South Africans have missed one or more debt repayments. There is huge pressure in South African culture to keep up with the Joneses. This leads to spending money which we don’t have, which leads to loans and credit card use.
Pay Back Debts In 2019
Consumers should focus on their debt in 2019. Any extra money should be used to try and get debt free and relieve the pressure that debt brings along.
- Step one is to pull a free credit report (each consumer gets one free credit report per year). Assess your credit report, score and status and see if everything is correct.
- List all of your debts and focus on the current balance and monthly installments. Also check to see if any arrears (missed payments) are listed on any of the accounts. It is vitally important to make sure all information is correct. If not, contact the relevant credit provider and advise them to update the credit bureaux accordingly.
- Try to settle the most expensive debt first. Short-term and Payday loans typically have the highest interest rates (25-60%). Vehicles and home loans have the lowest interest rates (8-14%).
What Happens If You Can’t Afford All Of Your Debts?
If you can’t afford all of your debts you need to seek help and try to get the best advice. Speak to a debt counsellor to find out how to manage your debts. Only approach a debt counsellor that is registered with the National Credit Regulator (NCR).
If you qualify for debt counselling your debt counsellor will negotiate with your credit providers to reduce monthly installments and interest rates. This makes your debt a lot more affordable and saves you money in the long run.