How to pay off debt and save at the same time

With the South African salary increasing slower than inflation, household incomes are falling and many people are using credit to fund day-to-day living expenses. Most consumer budgets include far fewer luxuries as we grapple with increasing living costs and debt repayments. Thankfully, there are options available to help consumers deal with credit card and loan debt and even save money if managed correctly.

One of these is a debt consolidation loan, where you can combine your debt into one loan and pay off one monthly payment. For example, let’s say you have five credit cards with a total balance of R120 000.  With each card having a high minimum repayment accompanied with high interest, it will take you a long time to pay that R120 000 off, dealing with multiple creditors. With debt help through a Consolidation Loan, you will only have to manage one affordable monthly payment to pay the debt back.

It helps to ensure that you have a solid plan to pay back the debt. Use the money saved to pay for those increasing day-to-day living expenses or make additional payments into your loan to get it down quicker. In short, a Consolidation Loan is an option for better debt management – it will stop the collection calls, reduce your stress and allow you to make a single payment each month that you know you can make.

With an African Bank Consolidation Loan, you can combine up to five loans into one single consolidation loan up to R250 000. With repayment loan terms of between 12 to 72 months, you will have one convenient payment that enables you to better manage your loan and day-to-day living expenses. In addition, upon qualification for an African Bank Consolidation Loan, you can choose your “payment break” – one month where you can take a break from your repayment.

Perhaps the most important part of any debt consolidation programme would be knowing how much you are paying, as well as for how long.  Another great bonus to this plan would be your actual credit score.  You see, because you no longer have a growing debt balance, as well as no late payments reported each month on the credit report, your score is now going up! The key is not to use those credit cards any longer, otherwise you will be back in the same situation. 

What happens if you ignore your debt?

When you miss multiple payments, you will start to receive phone calls and text messages from your creditors. It’s an extremely stressful situation. It might be tempting to block your creditors’ phone calls and messages, but this route can be very detrimental to your credit score. Your continued missed payments will still be reported to the credit bureaus. Credit scores are judged in part by on-time payments – every time you make a late payment (or don’t pay at all), your credit score is affected.

This means that, month after month, the amount owed will go up while the credit available will go down and even vanish if your credit cards are deactivated. Even if you continue paying all your debt, it can be a daunting juggling act dealing with many different creditors. For example, you may have a creditor willing to negotiate with the rate or amount owed, but maybe this represents only 10% of your overall debt problem.

The best way to tackle debt is with a debt management plan. Understanding that you do have options is very important.  Debt consolidation can help you save a lot of time and money, in terms of interest paid.  For further information or resources, feel free to contact us at any time to explore your options.

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