Drowning in debt? Here are your options

Momentum Financial Planner, Janine Horn, offers some advice for those who are struggling to make debt repayments.

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Debt is a universal burden and a necessity to this modern life, but it is also a danger and an extremely slippery slope that can quickly hurl you and your family off a financial cliff.

According to the Credit Bureau Monitor, South Africa has over 26 million active credit users. Even worse, only 16.5 million of those consumers are classified as in good standing and regularly pay their bills. This means around 10 million credit users are behind on their payments, or worse, have completely defaulted and remain economic outcasts.

According to Janine Horn, Financial Adviser at Momentum, debt is not a financial death sentence and can be managed. “Over-indebtedness remains a huge challenge in South Africa, but many consumers don’t realise they have various options to deal with debt.”

Horn says South Africans battling debt repayments should not despair and offers the following advice:

Consolidate your debt

One method of getting a handle on rampant debt is to take out what is known as a debt consolidation loan. This is where you take out a single loan to pay for numerous others. “There are two advantages, the monthly instalment is often less than all the smaller debt repayments combined, and the interest rate charged is often lower,” says Horn.

She says this is also convenient to pay one loan account that covers all debt. “Now more than ever, banks are willing to help clients with debt consolidation, because the credit crisis is seriously causing the one thing banks absolutely want to avoid– defaults on payments.”

By going through a proper debt consolidation process, Horn says this will also help improve your credit score for any future (but necessary) debts you may need to incur.

Go on holiday

No, this doesn’t mean going to the beach on a lavish getaway, the most common holiday consumers are taking these days is a payment holiday. If you are unable to make your monthly payments, Horn advises you talk to your lender or bank and find out if a payment holiday is available.

“By doing this you can possible avoid making payments for a certain period of time, but don’t forget that there is price to pay in terms of future interest and fees,” says Horn.

Debt free is the only way to be

Although there are some debts you simply cannot outrun such as home loans and car repayments, Horn says you should be aiming towards a life with no debt, living within the means of your monthly income. “This may seem impossible to achieve but it should always remain a top financial goal. The last two years has taught us that financial crisis, be it personal, national, or global, can come out of nowhere, so you should aim to be ready for whatever comes your way.”

In the end, Horn says debt should never be an obstacle on your journey to success. If you are worried about how to handle rising debt, she advises talking with an accredited financial adviser to provide clarity and comfort in these trying times.