Let’s face it – debt is expensive. What many people aren’t aware of is that debt is actually
expensive. The cost of the debt is decided by the credit providers and the bank. They make
their profit by charging you interest on the loan you have taken out. According to the World
Bank, South Africans are the biggest borrowers in the world, with up to 85% of the
population in debt.
Different types of debt
On the whole, asset-backed debt like finance for vehicles and home loans are the least
expensive types of debt. However, it is personal loans and credit cards that are more
expensive. Unfortunately, these are the most popular loans in use.
The most expensive debt has to be the pay day loan. This is a loan that is available for a very
short period of time, typically only for a month. Additionally, the interest rates on these
loans are extremely high – up to 5% per month.
Can I focus on paying off only 1 debt at a time?
The quick answer is no. It is important to ensure that you pay all the debt you have, every
month. If you miss out on a payment, it will negatively affect your credit score. It also means
that you’ll have to pay more interest, fees or penalties because of the non-payment.
By paying your debts when you are supposed to, you also have the option of paying more
than what is due every month. If you can do this, it’ll help to pay off the loans that have
higher interest loans and that ultimately cost you more.
Consider debt counselling
Debt counselling is designed to assist over-indebted consumers. By applying for debt
counselling, you’ll have the opportunity to pay a much more affordable debt repayment
every month. Additionally, it can allow you to pay back a lower interest rate in most cases.
While you cannot take out any more loans when under debt counselling, it does mean that
you can repay all that you owe and still have sufficient money for living expenses.
Once all the debt has been repaid, you’ll receive a clearance certificate that all unsecured
debt has been repaid.
For more details about the cost of debt, or for assistance with debt counselling, contact One