debt spiral

Did you know that nearly 25 Million South Africans have some form of debt?  Debt can be a good thing if its managed well. Unfortunately, there are over 8 million consumers that have found themselves to be over-indebted. More than half their salaries are going towards servicing debt each month and they are starting to fall behind on repayments.  Before long they find themselves in a debt spiral.

What is a debt spiral?

A debt spiral can make you feel like your life is out of control, no way out and it can start with something as simple as a credit card or small loan.

To give an example, when someone leaves school and wants to study, they might turn to a student loan. Now they have less money to pay for the daily costs of living such as food and water because they must pay monthly towards their student loan. To get to university, they may decide to finance a car. Now there are additional monthly instalments and interest charges.

To keep up with the cost of living they’ve applied for a credit card, but credit cards have even higher interest rates.

This is when the debt starts weighing a person down and becomes too overwhelming. To start paying off their ever-increasing debt, they take out more credit to pay the debt. They may apply for a consolidation loan to reduce the monthly repayments, but this extends the debt term and can often be at a higher interest rate.

As the debt becomes too much to pay each month, repayments are skipped and soon the person starts to feel as though their life has spiralled out of control. They find themselves robbing Peter to pay Paul and just do not know how to get through the month anymore.

This could have been avoided by looking out for the early warning signs:

  • Maxed out credit cards
  • More than one loan
  • Debt that exceeds savings
  • Lack of proper budget.

Don’t wait until it is too late. If you feel your debt is starting to spiral out of control contact Meerkat by today. Our experienced consultants can discuss the options available to you and partner with you on your journey to becoming debt-free.

6 Ways to get your debt repayments under control.

  1. Do the math. How much debt do you really have?
  2. Write a list of things you’re willing to give up and start keeping track of every cent you spend
  3. Increase the amount you repay on your debt each month if you can.
  4. Start an emergency fund. Putting a little away often can soon build up.
  5. Deal with your money triggers and stay positive!
  6. Ask the experts for help

Work out a minimum needs budget

Start by working out how much you need for day-to-day living. Look at your biggest expenses first like your housing, car (transport) and food. Once you’ve identified these, see if there are any ways that you can cut back.   For example:

  • Get a housemate to help with rental costs.
  • Downgrade your car to a more affordable option.
  • Cut down on food costs and take advantage of daily/weekly deals.

Make more max payments

When you only make minimum payments, like on credit cards - you end up paying very little towards the balance because most of your payment is actually just paying the interest incurred. Get the interest rate lower by making more maximum payments and you’ll start seeing the dent in your debt!

Start saving 

Huh?! This might seem weird but it’s highly achievable if you plan ahead. When you get paid, take out a small amount and put it in savings. This will help to build an emergency fund in case you ever need it. (Plus, it stops you from reaching out for that credit card that you’re paying off!)

Find your money triggers

Do you have any triggers that make you spend money? Perhaps you get bored and end up shopping up a storm? The key to being debt-free is figuring out what triggers you to spend, and knowing how to respond to it.

Tell yourself “I can do this”

We all know that paying off debt is difficult, but it makes it even more challenging when you don’t believe that you’ll come out of this journey with more financial freedom. Figuring out how to pay off debt on a small income is just the start, but staying positive will help you achieve your goal!

Ask the experts for help

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We can provide immediate financial relief and protection from creditors.

We'll also deal with all your creditors on your behalf, leaving you to focus on what matters to you most.

Together, we can do this!