TransUnion has found that South Africans have fallen behind on their debt repayments. A third of clothing account holders have fallen behind with more than 3 or more payments according to a TransUnion report. In December of 2020, the report showed that 12% of credit cards and 22% of personal loans were also overdue by 3 or more payments. This would classify consumers as “seriously delinquent”.
When your store account is overdue your account is considered delinquent. Most companies don’t report a delinquent account until the account is 30 days late. If you manage to catch your overdue account in time, your credit score won’t be affected.
However, if your account has reached delinquency you may be charged with penalty fees and your credit score will be negatively affected.
If you’ve found yourself in this position, take the time to develop a plan that will help you get rid of your debt.
Pay your bills on time
As you plan on reducing your total debt, the most important thing is to pay your debt accounts on time, every time. You will have to make this a priority with all your debt accounts. Making late payments will impact your credit score and result in additional interest and charges.
Keep making at least the minimum monthly repayment on all your debt accounts. Although this won’t reduce the principal amount, you won’t be charged additional interest. Ideally, you would want to pay much as possible towards your debt accounts. This will help settle your debt as soon as possible.
Reduce your spending
Now that you’re on a mission to settle your debt, you need to take advantage of what you have control over. You control how much money you spend.
Reduce your monthly expenses by:
- Setting up a monthly budget
Setting up a budget will help you determine how much money you have to spend every month. Prioritise your debt repayments and work with what you have leftover to pay for other monthly expenses.
- Avoid impulsive buying
You can completely derail your budget by making a few impulsive buying decisions throughout the month. To help you stay within your budget, make shopping lists and make do with what you already have.
- Reduce your fun expenses
Tighten up on your fun expenses while you’re paying off your debt. Keep in mind that this is only temporary. Reduce the amount of money you’re spending per week by avoiding takeouts or buying lunch at work. Rather make your meals yourself and save some money where you can.
- Look for deals
When you do your grocery shopping, avoid overspending by going to more affordable grocery stores and finding good deals.
Create a repayment plan
The quickest way to get out of debt is by creating a personalised repayment plan for yourself. This plan will keep you motivated and increase your chances of becoming debt-free.
There are a few debt repayment strategies that you can use. Here are some examples to get you started:
- Debt Snowball method
Become debt-free as soon as possible by paying off your lowest debt amount first, and roll that repayment amount over to your next lowest debt amount. Keep rolling the debt repayment amount over to the next lowest debt account until you’re debt-free. As your repayment amount grows it will become easier to pay off the bigger debt accounts. Read more about the Debt Snowball Method here.
- Debt Avalanche method
Pay off all your debt and save money through interest. Become debt-free by paying your high-interest debt first. By paying off your high-interest debt first you’ll end up saving money in the long run. Learn more about the Debt Avalanche Method here.
Consider consolidating your debt
If you have more debt than you can handle, consolidating your debt may be an option. Consolidating your debt will help you to afford all your debt repayments and cover all your other monthly expenses.
If you are struggling to afford all your monthly expenses and debt repayments you may be over-indebted. We recommend that you use debt review to help you get your financial situation back on track.
Debt review was introduced by the National Credit Act (NCA) in 2007 to help over-indebted South Africans as a debt relief measure. Since then the process has helped thousands of consumers become debt-free.
The process is ideal for consumers who earn an income and are struggling to make ends meet due to debt. If you are over-indebted we recommend that you contact a debt counsellor who will help you get your finances back on track.
Contact us today for more information about debt review. Let us help you with your debt before it’s too late.