5 Ways to Get Out of Debt in 2020

If you have started the new year in debt then you are not alone as many South Africans are carrying large amounts of debt in the form of credit cards and loans, but if you want to start 2021 debt free then this is your year to get your debt under control and get out of debt.

debt free

Here are 5 ways to get out of debt in 2020.

Start with a Strict Budget

The main reason that many people end up in debt is because they don’t track their expenses, which results in them overspending. If you want to get out of your debt, then the first thing you will need to learn is to spend wisely and getting on a budget will help.

Having a budget makes it easier to see what all your essential costs are, how much money you have left after all your bills are paid and what non-essentials you can cut back on.

You may see that your spending too much on takeaways or paying for streaming services that you are not using. If you cut these out for a year then you will have more money to put towards your debt. So take a look at where you can reduce costs and any extra savings can go towards debt.

Give Your Income a Boost with a Second Income

If you are deep in debt then you may need to do more than just cutting back on spending to pay it off, which means you will need to look at boosting your income with a second job. The income you earn from this second job can be used solely for paying off debt as your main income will be used to service your bills.

Pay Balances Strategically

If you are carrying multiple balances on different credit cards then you will need to tackle the one that costs you the most first, which are the ones that have the highest interest rates. You may want to start with your smaller debts first and then your larger ones, but instead of focusing on the different amounts you owe, rather focus on what each balance is costing you.

Paying off the highest interest debt first will take longer, but you will save money in the long run once the debt is paid, which will free up some extra money that can then be used to tackle your next highest costing debt and so on.

Make Debt More Affordable

Your debt will be easier to pay down when the interest rate is lower. If you have credit card debt, then see if your issuer is willing to negotiate a lower rate. If you are not able to get a lower rate, then look at a credit card that offers 0% interest for a set amount of time. You can then transfer your balances onto a new card with a lower rate, however, if you choose to do this you will need to be able to pay the balance off before the special rate ends, otherwise, you will be hit with interest.

Another option is to go for a consolidation loan, which is where you combine multiple debts under one new loan, so that you have one monthly repayment. The interest rate on these loans is often lower and as you will get a payment plan for a set period of time, so you won’t be paying debt off for years to come.

Start Building Up an Emergency Fund

Even if you manage to pay off your existing debt you will want to avoid it again in the future and this can be done by having an emergency fund. You need to save at least three to six months of living expenses, so that when something unexpected pops up, you won’t need to rely on your credit card to pay it. Along with paying off your debt in 2020, you should also make having an emergency fund a goal and a priority.

Being debt free is good for your wallet, your credit score and your mental health. Focusing on paying down or off your debt this year will put you in better financial shape for next year.

Want a Debt Free January? Then You Need to Plan Your Holiday Spend

It can be easy to get swept up in the festive season, but don’t let the festive fun be financially ruining. Start the new year with less financial stress by budgeting for the holiday expenses.

It can be tough to tighten the financial belt at this time of year and festive spending can easily run away with you. So how can you plan your holiday spend so you don’t end up in a mountain of debt in January?

The first trick is not to treat December and January differently. You need to have a budget, know your income and expenses and budget accordingly so that you can avoid any unnecessary debt.

Budget Your Expenses

You will need to work out what you are going to spend over December and January. This list of expenses will need to include the normal items that you spend money on every month plus any extra expenses like gifts, holidays and so on. Also, don’t forget that if you have kids then you will need to factor in back to school expenses in January.

Your regular items in your monthly expenses will include car payments, home loans, utilities and insurance. These costs should be first in your budget and should be paid as soon as you can. You will also need to budget for any new year increases in school fees and medical aid, for instance.

The extras that you are budgeting for should be frugal but also realistic. This means that you shouldn’t be overspending, but it doesn’t mean that you can’t have any fun.

Manage Your Money

Once you have your budget sorted, you will need to stick to it and to do this you will need to manage your money.

Your November paycheck will need to cover your regular monthly spend in December, which will include all your debit orders as well as end of year costs like holiday spending, gifts and so on. This paycheck needs to last until the end of December.

Your December paycheck will then need to take you through January and will need to pay for all your regular expenses as well extras like back to school items.

If your employer pays your December paycheck early then it is a good idea to transfer your salary into a savings account, so you aren’t tempted to use it. Just remember to transfer the money back before your debit orders for January come off. Also, avoid the temptation to dip into your January salary to pay for December.

Say No to Overspending Prompts

Not only do you need to pay attention to your budget, you also need to think about what makes you spend more at the end of the year.

This time of the year is where retailers bombard you with specials and discounts, but these are not once in a lifetime offers. Unless there is a deal on something that you were already going to buy and have budgeted for then rather avoid the sales.

Another trigger could be social pressure and tradition. We might put pressure on ourselves to do things the way they have always been done regardless of the cost, but if tradition costs too much then maybe its time for tradition to change. Social pressure is where we think we have to get certain items that maybe others have and so on. But you don’t need to keep up with them, just be happy with what you have and don’t feel the pressure to spend more money on things like gifts because that is what others are doing.

Keep to Your Budget 

Sticking to a budget can be difficult, but here are some tips that can help.

  • Leave your credit cards at home and only use cash to buy things. This will help you to watch what you spend and not to overspend as you can only spend the cash that you have.
  • You can set limits on your credit and debit cards. You will then only have a certain amount to spend, which can help you to avoid overspending.
  • If you have any reward points saved up, then this is the time to use them.
  • Before you hit the shops, you should have a list and stick to it.
  • Check your budget regularly and tick items off as you pay for them.

When it comes to budgeting it does require discipline and may require some cutbacks. Once you have a budget that works for you then stick to it. However, not everything goes to plan, especially around the Christmas season, so if you are finding finances tough you can opt for a personal loan for your Christmas spending. If you do this though, you need to ensure that you can afford the monthly repayments and can comfortably put these repayments in your budget. The interest rate on a personal loan is usually lower than a credit card, so it might be a good idea to take a Christmas personal loan to get you through this tough financial time.

Black Friday Is Coming…But Avoid Getting into Debt

It’s almost that time again when the shopping frenzy hits for Black Friday, which will be on 29thNovember this year. So if you are planning to shop the deals then you need to prepare whether you are shopping online or in-store, you need to have a plan so you don’t take on more debt then you can afford.

Here are some tips you can follow this Black Friday so you can avoid unnecessary and spiralling debt.

Have a Shopping List

Before the sales start you need to have a plan and that starts with a list of things you want or need which are necessary. This will help you to focus and to only look for those items.

If you are shopping online, then browse your favourite stores and add items to your wish list. Decide on the items you definitely need and shelf any others so you can avoid overspending.

On Black Friday it is very easy to become tempted with all the sales and discounts, which can lead to impulse spending, so have a list that you can afford and stick to it, so you can avoid unnecessary debt.

Have a Clear Budget

If you want to avoid overspending, then you need to have a budget and you need to stick to it. Your budget should be realistic so you can avoid disappointment but also one that you can afford without going down the debt hole. This is especially true if you are planning to buy items on credit. You will need to be able to afford the monthly repayments or will need to be able to clear the amount at the end of the month. If you have saved up for Black Friday then you have an amount to work with, which will make budgeting easier.

If you can’t afford a Black Friday budget, then it’s best to stay clear of the shopping malls and online retailers that day.

Keep an Eye Out for Affordable Gifts

Christmas is around the corner from Black Friday and following the festive season is JanuWorry, so you can get a head start by using Black Friday to get Christmas gifts and even back to school items and save some money. However, avoid getting swept up in the sales by knowing what you need and only get those items.

Plan Ahead

You can use Black Friday as an opportunity to buy non-perishable household items that you know you will always need. You can look for specials on cleaning products and toiletries and stock up on them. You can save money on these and you won’t need to buy them for a while.

Limit Your Spend on Credit

When you buy on credit you can get the items instantly, but you will pay more in interest over time. If you do plan to pay on credit, you should try and clear the balance at the end of the month or you should try and pay more than the minimum to avoid paying too much interest.

Ideally, you would want to have a savings pocket for Black Friday, so you can avoid credit altogether.

Keep an Eye on Your Bank

Whether you are shopping in-store or online, keep an eye on your SMS and bank notifications and if you see anything suspicious, report it to your bank immediately.

Take it Back

 Black Friday is full of temptation and if you have fallen into the trap of impulse buying, only to regret the purchase or find you can’t afford it then return the items and get your money back.

Black Friday is becoming increasingly popular in South Africa and it can be tempting to overbuy, but this will just to lead to debt you might struggle to manage. So, have a plan, a list and a budget and stick to it.

Need Debt Management Tips? Take a Look

When you are focusing on your financial goals, you need to look at trimming and eventually eliminating your debt. Having financial discipline and motivation to get out of debt will help you to feel financially secure and you will be in control of your money.

debt free

Take a look at these debt management tips that will help you to start your journey to a debt free life.

Did You Know Bad Debt Negatively Impacts You?

When you owe more money then it becomes less likely that you can repay your debt. You can easily find yourself trapped in a debt cycle when you borrow too much and it becomes increasingly harder to get out of it.

Your credit score becomes negatively impacted when you start to skip payments or when you pay late, which will make it harder for you to get approved for larger items like a home loan.

Your credit score is calculated via a formula that looks at your ability to pay your bills, the amount of debt that you carry and how it compares to other borrowers. The single number that appears on your credit report shows your ability to manage existing credit and the higher your score then the better.

So How Does Your Credit Score Affect You?

When you have a low credit score then it means that you will find it harder to gain access to various loan facilities like vehicle finance, overdrafts, home loans and credit facilities because you are seen as a risky borrower.

If you are applying for a job, a company may run a credit check on you and if they see you have a negative credit score then it could affect your job opportunities.

If you own a business, then you may struggle to secure a business loan or better terms if you have a poor personal credit score.

credit score

Why Are People Over-Indebted

South Africans are big borrowers and credit extensions are growing faster than job creation, but there are a number of other reasons as to why people are failing to manage debt responsibly.

The main reasons are:

  • Retrenchment, loss of employment or closure of business
  • Lenders giving credit to those that are not able to pay it back
  • Impulse spending
  • Living beyond your means

Is There Good Debt?

Good debt is money that you borrow in order to make more money. This type of debt will build wealth over the long term, so that you are better off then you were.

It is then more like an investment that will grow in value or will generate long-term income like a student loan that will help you to earn a better income in the long run or a home loan that will give you ownership of a property that is likely to increase in value.

Good debt is then when you buy high value items like a home and where credit makes it easier for you to afford these. When you have continuously paid creditors on time then you will be more likely to be approved for these type of loans.

In order to maintain and build a good credit score, you will need to manage your accounts and pay the full instalment on time, every month.

Manage Your Debt with these Tips

Know What You Owe

If you are struggling with debt, then the first thing that you need to do is organise your finances. Determine the exact amount you owe and who you owe money to. Keep a list of all your debts and take note of the creditors, monthly repayments, the total that you owe and when payments are due and keep this list up to date.

Having everything down and easily accessed can help you to know where you stand. You will also find it easier to keep on top of your debt obligations.

Have a Budget in Place

You will need to have a budget in place to see what money is coming in and what is being used for expenses. This will give you an idea of what you have every month and how much debt you can afford to repay each month.


What to Pay Off First

You will need to prioritise your debt list, but which one should you pay off first? Some debts that are more expensive than others, so you should target debts that carry a high interest rate first and the one that is costing you the most. Your credit card is usually the worst one so paying this off first can help you to save money in the long run.

Pay What You Can

Paying a little extra then what you owe every month should be the goal as you will pay off your debt faster, but it is not always possible. You will need to pay at least the minimum monthly payment to make sure that your debt doesn’t grow. It is a good idea to pay extra on amounts that have high interest rates first.

When you miss a payment it becomes difficult to catch up and if you fail to pay for several months in a row then your account may end up in default. Making the minimum payment will stop your debt from growing and will make sure your account remains in good standing. If extra cash is freed up later on then you can always pay more. You can stay on track by setting up monthly debit orders.

Stop the Impulse Spending

You should set aside a monthly amount that you can afford to buy some luxuries. When you create a small splurge fund in your budget that is used for indulgences it will allow you to spend money on things that you really want but you will need to stick to the amount that you have set aside.

If you are susceptible to impulse spending, then you need to curb your habit. Before you buy anything that is not part of your budget, you should stop and take a day or two to think about the purchase. More often then not you will realise that you don’t really need the item.

debt consolidation

You Can Use Debt Consolidation

With debt consolidation, you are effectively taking out a new loan to pay off a number of smaller debts. Your multiple debts are combined into one, larger debt, but it usually has a more favourable pay off term like a lower interest rate and lower monthly repayments.

This is an effective way to pay all your creditors at once and you will then only need to worry about one monthly instalment. Debt consolidation is ideal if you are over-indebted and have multiple or high loan repayments. However, you will need to be disciplined with money to go down this route so that you don’t end up spending your debt consolidation loan on other items instead of your debt, because this will just see you in further debt.

Give Yourself a Pat on the Back

You should set yourself goals and when you hit a debt reduction milestone then you should reward yourself within your means of course. This will help to keep you motivated. Set a reasonable goal and meet it. Every time you hit a goal you will have a sense of accomplishment and will push you to carry on with your debt reduction plan so that you can live a debt free life.


Struggling to Pay You Loan? Here is What You Can Do

There are times where you will need credit and it can help in many situations, but if you are not able to pay your loan on the date that you originally agreed or you miss payments then credit can become a nightmare. If your financial situation changes or more unexpected occurrences happen then it can create a lot of issues, especially when you are already sitting with outstanding debt.

If you are struggling to pay your loan, then here is what you can do.

Get in Touch with You Loan Providers

If you see that you will not be able to settle your loan balance on the due date or may miss a payment, then the first thing that you will need to do is contact your loan provider. It is a good idea to contact them in writing as proof that you did contact them.

Speak to your loan provider about your situation, inform them that you are not able to pay the loan and ask if they will be willing to work with you to come to an alternative arrangement. Your loan provider is under no obligation to do this, but you might be surprised to find that a lot of lenders will be willing to work with you.

What Happens When You Miss a Payment?

Missing payments does have consequences and here is what happens when you miss the first payment on different types of credit.

Missing Your First Credit Card Payment

When you miss a credit card payment on the agreed date then you will probably incur additional fees and if you miss several credit card payments then you could lose your access to credit cards. You might be able to arrange for your credit card repayment date to be moved to another time in the month, so that you can pay.

Missing Your First Payment on an Instant Loan

Instant loans and payday lenders will require you to pay on a specific agreed date according to the terms and conditions. If you fail to pay and do not make any arrangements with the lender, then you will be issued a legal notice to settle your loan or make arrangements. If you don’t, then your account could be handed to the courts.

Keep in mind that most instant loans are deducted from your bank account when the payment is due and the money is available.

Missing Your First Payment on a Personal Loan

Missing a payment on a personal loan will likely result in a notice to pay from the lender and you may incur additional interest on your loan. If you are about to miss a payment, then you need to contact your loan provider as they might be willing to work with you. There are loan providers that offer debt consolidation loans, which is where you will use credit to settle your debts and then you will have one lower, more affordable loan to pay back.

Missing Your First Payment on a Debit Order

If you have monthly debit order like medical aid or DStv and you do not have enough in your account to pay it, then you may incur additional fees from your bank when payments are declined. Also, money will likely be deducted from your next deposit.

When you miss payments then your credit score will be affected negatively and you will struggle to get credit again in the future.

What Happens When You Don’t Pay?

If you are not able to make an instalment, then you need to try and make alternative arrangements. If you don’t contact your lender, then they will assume that you don’t intend to pay and will proceed down the legal route. Many lenders are willing to work with you, so make sure you contact them.

However, if you have ignored a notice to pay, haven’t settled your account and haven’t contacted your loan provider, then your account will be handed over to a legal representative. You will then be issued with a notice to get in touch with the legal representative and if this is ignored then you could end up in court, which carries costs of its own.

What About Your Credit Score?

You need to know what your credit score is and keep it in good standing. If you miss payments and don’t settle your account then your credit score will be negatively impacted, which will then affect your ability to get credit again in the future.

If You Can’t Handle Your Debt

If you have too much debt and are paying multiple lenders with multiple interest rates, then you should seek the advice of a debt counsellor. They will assess your debt situation and if they find that you are over indebted, then you will be put under debt review. This process will help you to manage your debt and a debt consolidation loan can be used to settle your debts and you will only have one, affordable monthly repayment to make.

If you are struggling with debt then don’t ignore it, speak to your loan providers and if you need help then make sure you get it, so that you can start living a debt free life.

Need to Recover from Impulse Spending? Here is How

Have you blown your budget? Have you given in to impulse spending? Are you worried and kicking yourself for overspending and are wondering how you will cover the credit card payments? If you have fallen into overspending, then you will need to be proactive and look at ways you can tighten your belt and be smarter about your spending habits.


Here are ways that you can recover from your spending splurge.

Any Save is a Save

Even being able to save a little can help you after a big splurge. Take a look at your budget and see where you can cut back and trim expenses. This will create little savings, but whilst these won’t clear your debt overnight they do add up and every bit counts when you are paying off debt.

Save More with Automation

It’s easier than ever to spend money due to credit cards, online shopping, constant promotions and social pressure. This means that for some of us it is harder to save money.

You may have every intention to save money, but if you are struggling to keep to this then you may want to consider auto-deposits into a savings account. This means that once you get paid, the money that you intend on saving is automatically transferred to your savings. It may mean that you will need to readjust your budget to accommodate for this, but that money will be going towards your future goals instead of impulse buying. The amount is up to you, but you will need it to be a comfortable amount that doesn’t put you under financial strain.

Hit the Unsubscribe

Spending money is easy because nowadays it takes just a click of a mouse or a swipe of a card. If you are subscribed to a number of online shops that are constantly pushing discounts and promotions, then hit the unsubscribe button.

These type of emails are designed to make you want to buy more than you need and if you receive these emails everyday then the temptation can be hard to fight, so rather click the unsubscribe button and stop receiving these emails altogether. If you don’t know about their promotions, discounts etc. then you will be less likely to spend.


Create Your Payoff Strategy

Overspending is not just those big once off purchases, but rather anything that has put you into more debt and has led you further away from your budget. You can easily overspend on just one item, but it could be also many items over a period of time that has landed you in debt.

This means that you will need to create a payoff strategy that has specific goals like you want to pay off a certain amount each month and so on. Credit card interest will start to accumulate, so there is no point in waiting and you should start paying off your debt now.

If you are in a bad debt situation and have multiple debts and interest rates and are struggling to keep your head above water, then you may want to consider seeking help from a debt counsellor or even consider a debt consolidation loan depending on how far in debt you are.

Get More on the Side

Whether you are living paycheck to paycheck or if your debt is just mounting faster than what your income can keep up with, then you may want to consider taking on an extra job. If you had made cutbacks on your budget and can’t go any further, then you will need to look for ways you can increase your income. This can be a temporary fix and even just a few hours a week can help. Have a look around for jobs that suit your current situation and look for freelance opportunities.

You can also look around your home and sell things that you no longer need to get some extra cash.

You Can Cure Your Impulse Spending Hangover

Knowing that you have overspent and letting your debt get away from you can be frustrating, but you can recover. Through cutting expenses or boosting your income or even both, you can get your finances back on track. You will need to change your spending habits, fight future temptations and stay disciplined whilst paying off your debt.

Living Paycheck to Paycheck? You Can Still Save

There are some things that we are not able to go without like food, housing and so on, but when you are living paycheck to paycheck it can be difficult to afford these necessities, especially when things are going up in price. On top of this, you know that you need to save, but this may seem like an impossible scenario.

However, even if you are living paycheck to paycheck, you are still able to save money, you just need to make some smart money moves and you will start building your savings in no time.


Here are some great tips that you can start using to save money when you are living paycheck to paycheck.

Have a Budget

This is the first step and the most obvious thing that you will need to do. You are not able to manage your finances and your spending without a budget. When money is tight, your budget and sticking to it is highly important.

To begin your budget, you should write down what you earn every month and write down every category that you spend money in from your utilities to take away food. You will be able to see what you spend and where you can make cuts.

When you are determining what you are able to spend in each category, make sure that you leave some room for savings, no matter how small.

Keep in mind though that your month’s budget will not be the same every month. For, instance, you may find that you will need to pay for car registration one month and then the next month, you may have something else to pay for and so on.

Also, you may find that you will need to pay a little extra in the summer to keep your house cool or you may need to get birthday gifts etc.

You should write down events like these and when they take place, you can adjust your budget that month in order to accommodate for the extra expenses. This will help you to save, but it will also make sure you and your finances are prepared so that you don’t get any surprises.

Get Your Debt Down

Once, you have got your spending down and made the necessary cutbacks, you can now look at your debt. The faster that you are able to pay off your debt the better as you will pay less in interest.

Start tackling your debt by paying more towards the debt that has the highest interest rate. If your credit card has very high rates, then you can look at getting an online loan that has a lower interest rate than your credit card. The idea then would be to pay off your high interest credit card debt with the loan and then repay the loan. You will save money because the interest rate on the loan is lower.

Wait…there are still more tips below…


Get Rid of Your Cards

If you are finding it hard to stick to your budget or are tempted in the grocery store to buy extra things that you don’t really need then you need to take action.

A credit card makes it harder to stick to a budget, this is because we fall into the trap of just swiping for purchases without thinking about what we are spending or we brush off overspending leaving it as a problem for another day.

If you are having issues like this then you may want to consider cutting up your cards, leaving them at home or even freezing them and just using cash to pay for everything. With cash, you are able to visualize a lot better about how much you are spending, but you are also limited to the amount that you have in your wallet, making overspending a lot more difficult.

Get Yourself a Savings Account

When you are living paycheck to paycheck, you will probably be only able to save a little amount each month. Keeping your savings in your checking account will make it difficult for you to see how much you are saving.

You should open a separate account for your savings, so that you can keep better track of what you are saving. Also, seeing this account grow can help motivate you to keep going and save a little each month. You will also be less likely to spend your savings when you have a separate account.

When you are choosing a savings account, try and find one that offers an interest rate so that your money grows a little each month and one that is free to have.

Ask to Waive the Fee

There are times that you may not have been able to pay a bill on time, so you were given a late fee that hurt your finances, but have you ever thought about asking the company if they would be willing to waive the late fee?

This may not work, but you have nothing to loose by asking and you may find some companies will be willing to do this for you.

Keep reading for some more tips…


Make it a Challenge

Once you have been sticking to your budget for a month or two, you will notice that it gets easier to monitor your spending. This is then the perfect time to challenge yourself to make little cutbacks in all your spending categories. Even if you are not able to cut back in all your categories or only able to make small cutbacks, the money will add up.

Switch Your Car Insurance

You are able to lower your car insurance premiums by shopping around, so you could potentially save money in this area.

Car insurance companies think that once you have signed up with them, you won’t leave and you may think that it is a pain to get new quotes and switch. However, staying with the same company may mean that you are not getting the best deal anymore.

If you have a good driving record but your premium has stayed the same or has even gone up over the past few years, then look at getting some free quotes and see if you are able to save on your premium by switching companies.

Increase Your Earnings

You are only able to cut your spending by so much and once you have done that; you may need to look at ways that you can increase your earnings.

It can be hard to find a job that pays better or to take on another job but there are other ways. You may find online survey companies will pay you to watch videos or take surveys. They don’t pay much but if you do it on a regular basis then you can earn a little extra.

You can also look for a freelance job where you can set your own hours and make some extra cash.

When you are living paycheck to paycheck, you are still able to save money, but you will need to be disciplined and manage your finances so that you can.

Carrying Too Much Debt? 6 Signs to Know If You Are

Many South Africans are carrying debt on both their credit cards and in the form of loans like a car loan. Debt is an unfortunate part of life that is hard to avoid as you may need a loan to buy a home, for instance. However, this doesn’t mean that you can rack up the credit card bills or take unnecessary loans.  


If you carry too much debt then you will need to face it and tackle it head on, but you will need to know and recognize the signs so that you are able to take action sooner rather than later. Here are 6 signs that you are carrying too much debt.

All Your Money Goes to Debt

You should take a moment and determine how much you are spending each month on debt payments. Take a look at your credit card bills and other financial reports and tally up the minimum debt payments and compare this to your monthly income. The ideal scenario is that your debt payments shouldn’t be more than 36% of your gross monthly income, but if you find that half or more of your money is spent on debt repayments then its time to make a change.

If you are just working to pay off your debt, then it can become stressful. You are not able to get rid of your debt overnight, but you can take steps to eliminate some debts. You can look for ways to lower your expenses like renting a cheaper place, getting a roommate, selling your car and taking a cheaper one to lower car repayments, cancelling unnecessary subscription services and so on. Making some changes no matter how small can help towards your debt.

Just Paying the Minimum

If you are struggling to make even the minimum payment on your credit cards, then you are probably carrying too much debt. You can call your credit companies and ask if they would be willing to lower your interest rates. If you have consistently paid on time and have a good history with the creditor, then the company will likely work with you.

Another option is to look for a credit card that has a low introductory offer rate and transfer your balance to this card. The idea here would be to pay all or as much as you can off before the promotional offer ends and adjusts to the higher rate.

A decrease in the rate will lower the current minimum payment and if you continue to pay the original payment, you will be able to pay the debt faster.

More signs of too much debt…keep reading…

There are Physical Side Effects of Too Much Debt

When you have too much debt it often leads to credit cards being nearly maxed out. On top of this, creditors can start calling you if you are behind on your payments. The stress that this can cause can start to affect your happiness, sleep, appetite and cause anxiety and stress. If you are always worrying about your debt, then you probably have too much.


Denied for New Credit

Your credit score is affected by how much debt you owe. The more debt that you have then the harder it will be for you to get new credit. Your approval for credit will come to a quick end as lenders and creditors look at your applications and decide that you are already overextended.

Common reasons for lenders and creditors to reject your application is that you have a low credit score, no credit history, too much credit and high balances.

Nothing in the Savings

When you have a nice nest egg then it shows that you have good personal finance management. This can provide you with an income after a job loss or cash for an emergency. However, if the majority of your money is going towards debt payments then there is probably very little left for savings.  

If you receive an additional income from a side job or if you receive a pay increase it doesn’t mean that you can get a bigger home, a new car or brand new items you don’t really need. Rather have a look at your savings account and determine if you have at least 6 months’ income as a cash reserve or liquid funds. If there is a lack of savings then it is a sign of a huge problem, especially if you are always shopping or taking on new credit.

Paying Your Bills Late

If you are carrying too much debt, then you are probably finding it difficult to keep up with your monthly payments. You could be forgetting about creditors and due dates completely or are sending late payments. When you owe too much, your credit score takes a negative hit and if you start to become late with payments then your credit score can take another hit.

If you find that you do have too much debt, then you will need to come up with a debt plan. You will need to have a disposable income in order to tackle debt, which can be hard to do. You can consider selling items you no longer need and putting this money towards your debt, taking on a part-time job or speaking with your creditors to come up with a plan. Another option is to speak to a debt counselor that can help you with debt and consider debt consolidation that places all your smaller debts into one, so that you have one affordable monthly repayment to make.

Should You Use Another Loan or Go for Debt Counselling?

There are many of us in South Africa that try to solve our debt problems by getting more debt. However, if you are not able to afford one loan, is it really the best idea to take out another loan in order to cover the first?

This will lead you to further debt and put you into a worse financial position. Fact is that the more loans you take out, the more money you will owe and the more interest and fees you will need to pay.


If you are struggling with your debt repayments then taking on further debt will only make the situation worse as your debt will accumulate and as your situation spirals out of control, creditors may choose to take legal action against you.

Another solution to your debt problems could be debt counselling where your debt is consolidated into one and you will not need to take another loan. Your debt is restructured into just one affordable repayment and as you pay this monthly amount, you will be working towards becoming debt free.

A debt counsellor has the ability to negotiate for lower interest rates and longer loan periods as well as offering you legal protection. With debt counselling, you are able to focus on becoming debt free and as you will be paying one lower monthly repayment you will be able to release more cash flow so that you can cover your monthly living expenses without having to resort to credit.

What Are the Main Benefits of Debt Counselling?

The first major benefit of debt counselling is that a debt counsellor will negotiate with your creditors on your behalf and get you a lower interest rate on your debt. They will also ask that the payment terms are extended. For you, this means that you will pay a combined, lower monthly repayment and free up some disposable income.

With debt counselling, you will receive legal protection from your creditors.  Creditors will no longer be able to call you and they will need to go through your debt counsellor. On top of this, your assets will also be protected from repossession, so you will not have to worry about losing your home or car.

As part of debt counselling, you will not be able to apply for new credit, so you will not be able to drive yourself deeper into debt. You can just focus on becoming debt free.

Keep reading to find out once you are debt free with debt counselling…

What Happens After Debt Counselling?

So you have come to the end of your debt counselling journey, so what happens next?

debt free

Once all the paid up letters have been received from your credit providers, you will receive a clearance certificate from your debt counsellor. This letter will confirm that you have settled all your listed accounts under the debt counselling agreement and that all your accounts are paid. This doesn’t include your home loan, which will just need to be up to date with payments.

The credit bureaus will also receive the certificate from your debt counsellor and they will no longer flag you as being under debt counselling.

As soon as your debt counsellor issues your clearance certificate, you are able to apply for credit again. The status of being under debt counselling will no longer have a negative impact on how credit providers perceive you. Instead, they may actually view you as a responsible consumer that understood they were over-indebted and acted accordingly.

However, before you take on any new credit, you should set up a realistic budget and have a financial plan in place. Your debt counsellor or a financial advisor will assist you with a budget and a plan for your future.

So, what happened to your credit score? After debt counselling, your credit score will be low, but you are able to rebuild this by making sure that you pay your accounts on time. You should make sure that any phone contracts, TV subscriptions etc. are paid and up to date.

Once you have completed debt counselling, get a copy of your credit report and see if it is updated. If not, then inform the bureau so that any mistakes can be fixed.

If you ever feel that you are over-indebted, then you can apply for debt counselling. With debt counselling, you can become debt free and get your financial future back on track.

Do You Know How the Debt Spiral Works?

When you first borrow money it might be so that you are able to build credit and usually starts with a store card and a credit card, but as time goes on, you may find that your wallet is full of plastic, your bank account is looking empty and all your money is going towards debt. These are signs that you are being dragged into a debt spiral.

debt spiral

If you feel like you are heading towards the debt spiral, then you need to know the signs and how you can avoid it before you get yourself too far into debt.

You First Get a Store Card

We all know that we need to build credit and have a good credit score so that one day we are able to take a reasonable loan when we need it. Often we start our credit journey with a store card as it is one of the easiest forms of credit to qualify for and you won’t need to have an existing credit record.

You will need to use your store card so that you can start building your credit score. This means you have purchasing power, but you will need to resist overspending and only buy the essentials that you would have normally bought and are able to afford to pay back.

If you buy more then you can afford with a store card, you are going to have debt and a high interest rate to contend with. Avoid impulse buys and only spend what you can afford.

Another Type of Credit

With a store card, you will gain instant buying and after a store card, many will get a credit card as well. A credit card can be used almost anywhere whereas a store card can only be used at the store that issued it, which means you have more buying power with a credit card.

You may think that you need a credit card to build your credit score further or you need it for unexpected emergencies, however, you only need one credit account to build credit card, so rather stick to one type of card, which should be your credit card. Your credit card doesn’t have limitations on where you can use it, but it does have a high credit limit, which can lead to large purchases you can’t afford and debt.

In order to avoid such large spending, especially if you are impulse buyer is to lower the credit limit and to remind yourself of what could happen before you pull your card out.

If you are already sitting with a maxed out credit card and you are not sure what you bought that was essential, then this is already a red flag of the debt spiral.

The debt spiral doesn’t end there…keep reading…

Taking on a New Debt

There might be times in life where you may need to take on new debt, for instance, you may need a new car. If you have a solid credit score and have been making your monthly repayments on your credit and store card, then you will qualify for vehicle finance.

You may think that if a lender is willing to offer credit then you must be able to afford it. However, you are the only one that really knows what you are able to afford.

It might be wiser for you to save up and drive your old car until you are able to afford a new car with cash. A car loan will put you into further debt, but if you really do need a new car and you need to finance it then create a detailed budget. This budget should forecast your finances for the next several months that takes into account your current debt and the potential for other vehicle related expenses.

If your accounts are already maxed out and new vehicle payments will push you beyond your limit then do not accept the car loan.


A Real Emergency

Let’s suppose that you decided to get that new car, even though you couldn’t really afford it and then a real emergency crops up, an unexpected expense that you need to pay for so that you can carry on with your day to day life. How are you going to pay for it? You may opt for a personal loan to cover the expense.

At this point, you may have not missed a payment and your credit score looks good, but in actual fact, you are broke and on the edge of the debt spiral. But you carry on and sign the loan agreement and your debt is taken further than what you can afford.

A Debt to Cover a Debt

So what happens now? You start defaulting on your payments and your credit score starts taking damage. You then think that you should take out a loan to pay for your existing debt, but because of your suffering credit score, you may end up with a loan that has a high interest rate. This can lead you to take out one loan after another in order to pay your lenders. Now you are in over your head and struggling with mounting debt.

This could have all been avoided if you had taken note of the earlier warning signs including maxed out credit cards, debt that is more than your savings and a budget that predicts cash flow problems.

If you are heading in this direction, then you need to stop and focus on reducing your debt and fixing the way you spend money.