Are you wallowing in debt and you can’t seem to escape the nasty loop? You name it: medical bills, an auto loan, a student loan, credit card debts, or even never-ending payday loans. On top of that, suppose your daily spending averages around $300-500 PM.
In this time in South Africa, it is not unusual to find yourself servicing a debt. After all, about 55 per cent of South Africans are living below the poverty line -- according to PMBEJD. That’s roughly around 30.4M of the total population.
If you have a huge debt load, serving all your balances can feel like a burden, particularly if your monthly income cannot cater for all your needs. This article mentions several ways you can pay off your debts even when your income is not much to settle your debts.
Know how much you owe
The first thing you ought to do is analyze the total amount of debt you owe. You can do this by listing all your debts. Be sure to note down details like the interest rate payable, minimum payments, and repayment plan.
You may rank your debts in chronological order, either starting from small to highest or vice-versa. It is your decision to make on which approach to take. This method is known as the snowball effect.
Focus on a debt a time
They say, “Start by paying off one debt”. That is true but as you focus on paying off a single debt, you ought not to neglect your other balances. Instead, try to pay minimum payments for all debts you owe, and then channel the extra cash available into a single debt. Choose which debt to focus on until you have paid it. This is known as the Debt Avalanche Method.
Since you will be injecting more cash to cover the principal balance, it means you will clear the loan faster as less cash goes into paying the interest. In contrast, you pay more interest when spread the payments to all your debts.
Trip down expenses
If you are finding hard to cope with your current monthly net salary, it is time you consider cutting down on some of your expenses. You have to make sacrifices for you to rid yourself of the debt load. By forgoing some expenses, you will be able to save good cash that you can inject into covering your debts. There is always something you can forgo. For instance, you don’t always need Cable TV or premium internet package. You could do fine with the basic package. You could save money on repairs and maintenance by going the DIY way.
Put your credit cards aside
Now that you want to be debt-free, it is time you stop accumulating more debt. Regardless of how enticing that credit line is, you have to make a decision not to make more credit card applications.
Communicate with your creditors
It is common to find yourself in a financial rock bottom. At such times, keeping up with the minimum payments can be challenging. If that’s the case, don’t hesitate to reach out to your creditor and notify them about your financial struggles. It’s also possible to negotiate with your creditor, where you could try to convince them to:
- Waive penalties for delayed payments.
- Lower minimum payments.
- Arrange for a payment deferment.
- Reduce your interest rate.
- Restructure the loan’s payment schedule.
Achieving any of the above will all depend on your negotiation power.
Your Paycheck is not enough
Even if your income is not enough to cover your debts, do strive to make an extra coin in other ways. The possibilities are endless here.
- You could sell extra items you no longer need on platforms like eBay.
- You could find a part-time job.
- You could pursue freelance work online.
- You could use your talents to make an extra coin.
- You start a small business of any kind.
Besides your day job, there are many ways to earn some extra money.