In another twist involving the public protector’s office‚ the Minister of Co-operative Governance an.
“In this financial climate, access to quick, easy credit has become a necessity for many stretched budgets in order for them to meet any variety of unexpected costs,” comments Prosperian Executive Chairman, Francois Olivier. “But one needs to make informed decisions when entering into debt to ensure that the credit matches the need, and that there is capacity to comfortably honour the repayments.”
Prosperian offers five top tips to help consumers curb their credit and limit their exposure to debt.
1. Good debt vs bad debt.
Almost everyone needs access to credit nowadays, but one must be very careful to use credit responsibly. With interest rates expected to continue rising, debt is becoming more expensive and should be reserved for necessities - now is not the time to spend money you don’t have on “bling”. You do not want to find yourself being burdened by loan repayments long after the utility of the loan has been forgotten.
2. Pay off expensive debt first.
First focus all extra payments on the debt that charges the highest interest rates, while still ensuring that you make the minimum repayments on any other credit arrangements. Once that has been paid off, move to the next most expensive debt, and systematically reduce your exposure to the debt with the highest interest rates.
3. Track your spending
The only way to identify areas where you can cut back on expenses is to have a clear idea where all your money is being spent. This means keeping an honest record of exact expenses and spending habits instead of estimates. You could be amazed at how much money is unaccounted for every month, which could be allocated towards paying down your debts.
4. Don’t use credit to finance your debt
It is easy to become trapped in a downward spiral if one keeps using credit to repay debts. Be proactive if the repayments are starting to overwhelm the monthly budget by contacting the lender and ask to have your debt restructured. Most reputable institutions would rather decrease the repayments in line with the client’s budget rather than have the client default on the debt.
5. Recognise and act on early warning signs
Denial is certainly not a solution to mounting debt. Be honest with yourself and acknowledge if there is a problem sooner rather than later. A number of options are available to help deal with escalating debt which are free, confidential, and non-judgemental. And the earlier you take responsibility for bad debt, the more options and the more time you will have to pay it off.