35% of South Africans pay their loans irregularly and/or when they can. There is also an increase in the number of people who are only making their minimum repayment on credit cards*
Whether you’re trying to pay off debt related to credit cards, personal or student loans, there are ways to save and pay your debts.
Here are a few methods that could help you:
Determine which method will work best for paying down your debts
- Pay off some of your debt even if it’s one of the smaller ones. This is a way of saving, because debt can be very expensive. The sooner you close some debt, the more you save on interest.
- Tackle debts that have the highest interest rates first. Then, once it is paid off, you focus on the debt with the next highest interest rate and so on. Experts suggest that the benefit to doing this is that you eliminate the most costly debt first, which can lift a huge weight off your shoulders.
- Another method that is often suggested is referred to as the “snowball method”, which focuses on the smallest debt first. Once you pay off that debt, you move on to the next smallest debt. The benefit to this method is thought to be that you may see progress a bit more quickly, particularly if you have many small debts
Negotiate for better interest rates
- It is important to understand exactly what interest rates you are paying and to negotiate for the best rates.
- A good credit record will help you to negotiate better rates.
Ensure that you have adequate savings
When income and expenses do not meet, people are cutting down on their expenses including, DSTV, electricity, groceries and holidays. There is also an increase in shopping at cheaper supermarkets or changing to cheaper brands*
Try and get ahead of the inflation curve and build up a savings pool.
- Draw up a budget and stick to it.
- Make savings automatic, what you can’t see you won’t miss. So goes the thinking behind automatic savings. After you’ve set up your savings fund and calculated the savings you need to achieve your short to long-term goals, you should have that money automatically directly deposited into a separate savings account. By automating the process, your savings is simply a separate account, and money you should begin not to miss in your daily account.
- Open a savings account where you put away funds until you have a substantial amount and then use that lump sum to pay off some of the outstanding debt. Give us a call and let the trusty Meerkat team renegotiate with your bank for a new repayment arrangement if you feel you are overindebted.
Ultimately, it is up to you to decide which method will work best for you.
Contact us at Meerkat for more advice.
*Old Mutual Savings & Investments Monitor 2018