How to avoid over indebtedness

Over indebtedness is a huge problem in South Africa, from taking on too much debt to changing circumstances, more and more people are finding themselves unable to cover their monthly obligations as well as their basic expenses.

A dangerous time of the year for credit users, the months of December and January tend to be very costly. With many family related expenses and loads of unforeseen costs, the festive season brings with it the need to spend- now more than ever this is a time to look at your finances and make sure you can cover your expenses. From Christmas presents and New Year’s fun to new school uniforms and supplies in January, not to mention a shorter payment month of December, this is the time where getting over indebted can come out of nowhere.

Something key to remember for any credit user, always ensure that before taking on more credit, you take into account all your existing debt, including store and credit cards, even savings per month. Plan to pay off as much debt as possible before the new credit is taken and make sure you can afford the credit, old and new. A thorn in the side of financial security, here are ways of how to avoid over indebtedness.

• Borrow as little as possible – as it is the festive season it is easy to find ourselves taking out small loans to cover the festive expenses. With a shorter month in Dec, as far as paycheck goes, there is less money with more expenses.
• Avoid lengthy repayments – if you can afford to pay back more every month then do, paying off the minimum amount will be fine as far as credit is concerned but will also mean you are paying more back over time.
• Be honest – transparency is key to solving debt, make sure your creditors know all your information before any agreements are made. Not being honest may mean you lose protection from the National Credit Act.
• Stick to your budget – with a set budget, taking into account all details of your finances, it is easier to see what you can spend and how you can afford to spend it. Including small expenses and money put towards saving, having a budget and following it strictly lets you take control of your finances.
• Keep track of spending, keep recipes and be accountable for every cent you spend.
• Pay debts on time – paying debts on time is key to keeping a good credit record, if possible try to pay a bit more than the minimum required amount, this will help you pay off your debts sooner.

An important part of you financial security, don’t let yourself become over indebted through over spending.

If you think your situation might be due to reckless lending, contact the professional consultants to get your finances in order as soon as possible.