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 installments 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 spiraled out of control. They find themselves robbing Peter to pay Paul and just do not know how to get through the month any more.
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 today. Our experienced consultants can discuss the options available to you and partner with you on your journey to becoming debt-free.