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How to Reduce Debt

Zulika van Heerden


Most South Africans have debt.  Many believe if you can charge it, you can afford it.  But there comes a time when you look at all the bills you have accumulated and think, “How in the world am I ever going to get out of all this debt?”  The answer is, by putting a debt reduction plan into use.  The more time you allow your credit cards to sit the more debt you will accumulate from finance charges and more purchases.

Consumer credit to households is estimated at R760 bn with an average % of debt to income of 73%.  So you are not alone in the fight to reduce debt.  There are ways that you can beat it and stay debt free.  Many of the things that you will have to do will need the cooperation from your entire household, so keep in mind that if not everyone is on board, then the your debt reduction plan will not succeed. 

Figure Out Your Debt
  Without including your mortgage, figure out how much debt you have incurred. Include your car, credit cards or any possession that has a balance on it that you will need to pay on.  Utility bills and other household bills do not get calculated but will help you when setting up a budget later on.

Devise a Plan of Action
 Now that you know how much debt you have you will have to figure out how much you can pay to each creditor and how long it will take for you to pay it off.  For example, if you have R10, 000 on a credit card and you can pay R500 on it every month, it will take you 20 months to pay it off. 

0% Balance Transfers
 The problem with having money sit on credit cards is that you accumulate finance charges every month.  If your balance is high, than most of the money you pay towards your debt will most likely go to paying the finance charge rather than the principal.  It’s a good idea to apply for a credit card or check the ones you already have to see if you can get a 0% balance transfer.  That way, you can start paying off the debt rather than the finance charges.

Debt Consolidation Loan

 If your debt is really high and you are having trouble paying enough to decrease your balances, you may want to consider a debt consolidation loan. Such a loan will bring all of your debt together and give you a lower interest rate than will your credit cards or other lenders.   

Be sure to find a debt consolidation service where you don’t have to pay a fee.  The last thing you need is to have more money to pay to a company. 

Stop Adding More Debt
 One of the most important things you can do is stop using your credit cards and start living within your means.  Do not rely on your credit cards to help pay for things you don’t have cash to buy.  It’s time to set up a budget and live within those budget guidelines.  Once you have paid off your debt, you will have disposable income again and be able to splurge once and awhile. 

Staying out of debt can sometimes feel like you can hardly keep your head above water.  But once you pay off some of your debt you will feel like a weight has been lifted off your shoulders and you can be free.  The most important thing about paying off your debt is to stay out of debt and start putting that extra money away for savings.

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