strong theme that emerged in Money Makeover this year was the extent to which applicants have accelerated debt in a short period of time. This is driven by the rising cost of living and increasing interest rates. As households struggled to make ends meet, they turned to credit to meet the shortfall. This is a very short-term solution that results in greater financial pressure once those debts need to be repaid.I used debt to try to fix my situation.
“In 2022 I got a personal loan from Absa to purchase machinery for the business. I got other smaller loans elsewhere, but they could only cover so much. Now I am under pressure because I have kids in school, a home loan, car finance and all other family financial responsibilities, including servicing the loans I took,” explains Sello.If you have multiple loans with high interest rates, one option is to consider debt consolidation, which is not to be confused with debt review .
The benefit of targeting the smallest debt first is that you have quick wins early on. This gives you a psychological boost to keep on track. Mlibokazi must ensure she closes the credit facilities once they are paid off. Mlibokazi could keep her credit card but reduce the credit limit to a smaller amount that is manageable and which she can pay off in full each month.Sello is looking for opportunities with which he can use his skills to find extra income, such as freelance writing.
Like many South Africans, Johan was caught in a debt spiral. The more debt he took on, the less was available to meet living expenses, and so he continued to take on more debt to pay the bills. This is only possible because he was able to negotiate lower interest rates through the debt review process. His average interest rate across all debt was reduced from 21.56% to just 0.09%. This, combined with his spending cuts, means he will have an opportunity to prepare financially for retirement.
There is a restructuring fee to cover administration costs and the cost of the court application. This is a maximum of R8 000. This fee is paid in your first and second month in debt review through your monthly repayment, and creditors are paid from month three.
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