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How to get out of debt


How to get out of debt

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This is a continuation of the post: (Link>>) 5 Signs that your debt is getting out of control as part of the Zonotho Debt series.

As mentioned, I was in the midst of a conversation with the man Rabbi Kasongo – a Senior Debt Expert working for Intelligent Debt Management.

My first question to him related to people with debt that was about to get out of control; but what about people who were already deep in the debt trap?

“How do I get out of debt?”

Rabbi’s response:

“Debt is a cycle and once you find yourself deep in it, coming out will be a struggle. But, for each problem, there is a solution and debt is not immune to this rule. Your starting point is to rate your problem on how severe and urgent it is. Based on this, you can apply the appropriate remedy. I’ll expound on three solutions.

Live within your means – Are you living within your means? Do you have a monthly budget? Budgeting is not a ‘nice to have’. Not budgeting makes it very difficult for you to track your expenses compared to your income. As a result, you will most probably end up overspending. In such a case, you’ll need to cut down your expenses and work out a budget which ensures that you can meet your needs without borrowing.

This process involves making decisions – some easy, some tough. Pack lunch instead of buying every day? Get rid of that cell phone contract? Move into a smaller house? Trade in your car for a cheaper or more fuel efficient car? Consider every option, especially the tough ones.

Aggressively tackle your debt –  Do not settle for just paying the minimum amount on repayments. If you can, take any extra money you find yourself with and pay it consistently into your debt. This will reduce the interest you pay, and therefore the length of time you are in debt. Every little bit counts.

Some experts suggest starting with aggressively paying extra into the debt with highest interest rate. After you have paid this debt off, use the money that you used to make repayments, to pay extra for the next debt with the highest interest. Continue to work your way down the ladder, until you pay off the lowest interest debt.

Another option is aggressively paying off the smallest debt you have. Then effectively work your way up the ladder. This helps psychologically because you may feel encouraged by having fewer people to pay faster. Build on this momentum.

Whichever route you use, consistently pay more than required, and pay it aggressively.

Make sure you do not miss payments – If your income is less than your debt repayments, then you are at a highly risky stage of missing payments. You should seriously consider approaching your credit provider for a more affordable arrangement. In most cases, this approach will not reduce your interest payable, and if not careful you may find yourself further trapped.

Another option you have is to approach a debt counsellor. The debt counsellor will work out a payment plan for you, and actually, restructure your debt in line with section 86 of the National Credit Act. This counsellor may be able to reduce the interest rate you are paying. They can also approach the court to investigate a reckless lending case or order you to go under debt review.

But if your debt repayments are between 80% – 100% of your income, debt review may be of little help to you. You may now need to consider applying for sequestration. In this case, your assets would be sold and paid to your creditors as per an agreement with lawyers. At this point, you will be declared insolvent.”

It is possible to get out of debt. It may take time, but with the right knowledge and application thereof you will eventually get there.



Benjamin is an Actuary working at a major financial services firm. He has experience in the valuation, design and distribution of wealth and investment products. Benjamin is insatiably passionate about teaching and empowering minds. All views expressed are Benjamin's own and neither reflect nor are influenced by the views of affiliated companies.

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