When you understand your debt profile, you will be better equipped for managing and
paying off your debt. Your debt profile is your affordability, and your debt responsibilities.
Your affordability can be determined by working out your debt-to-income ratio. This is your
monthly commitments versus your income. Divide your monthly debt repayments by your
net monthly salary to get your debt-to-income ratio.
Be strategic when paying off debt
If you have additional funds available and want to pay off your debt sooner, consider paying
off the debt that has the highest interest rate. This is usually your unsecured debt like
personal loans and credit cards. Don’t spend more on your store card before you have paid
off the total. Try not to extend your payment period. If you find yourself falling behind on
payments, contact your credit provider to set up a new payment plan. They will usually
allow you to pay smaller instalments but are likely to suspend your account and limit any
further credit until the loan amount is paid off in full. When looking at your overall debt
repayments, pay off as much as you can each month.
Consider debt consolidation and debt review
Debt consolidation is when you take out one large loan to cover several smaller loans – you
consolidate all of your debt into one lump sum. If used wisely, consolidation can be an
effective way to get yourself out of unmanageable debt. They are usually longer-term loans
available at a lower overall interest rate with lower monthly instalments. Debt counselling
and debt review is a legal process that was introduced with the National Credit Act (NCA). It
allows over-indebted consumers a way to hold onto their assets and protect themselves
from legal action from creditors. A debt counsellor will obtain a court order on your behalf
and to draw up a manageable repayment plan. He will liaise with creditors to renegotiate
payment at lower interest rates. Managing your debt wisely is the step to paying off your
debts quickly and efficiently.
Contact Onedebt today for more about how you can manage your debt.