Here at National Debt Support, we understand that debt is difficult to deal with both financially and emotionally. It can sometimes feel like an isolating experience you want to keep secret, but it is essential to remember that nothing is embarrassing about financial difficulties. At National Debt Support, we understand that bad debt happens to good people, and that is where our expert advice and professional services can help lighten your burden.

As we start to see the beginning of the end of the coronavirus pandemic, now is the time to regain control of your financial future and follow our 6 tips for getting out of debt.

1. Write down Your Debts and Prioritise Them

The first step to tackling your debts is to make a note of all the money you currently owe. This can seem like a daunting task but believe us, facing your responsibilities head-on is the only way out of financial difficulties. It is also essential to write down all the money you currently owe so that you can keep track of it all and not miss your repayment periods.

Prioritise debts that need to be paid back first, once you have a record of them,  work out which ones you have a little more wiggle room with.

Prioritising your debts doesn’t just mean paying back the largest amounts first. Instead, make sure that you keep up to date with important payments like your rent, mortgage or utility bills to ensure that you continue to have a roof over your head, water and electricity.

Next, you should pay off the debts with the highest interest rates to not pay back way more than you have to.

2. Make a Budget or Spending Plan

It is important to know exactly how much money you have coming in and how much is going out. It is usually due to poor budgeting that many people find themselves in debt in the first place.

Once you understand your finances, you can start making a budget or a spending plan. Look at your income and try to find ways to limit your spending. Is it possible to cut down on your phone bills or morning coffees? If so, this is a great place to start. After that, you can look around for cheaper alternatives to the services you already use. Many of us don’t even realise that we are paying more for our utilities or television plans than we need to be.

Developing a smarter spending plan will leave you with more cash in your pocket at the end of the month.

3. Look for Extra Income

If you find that your regular income doesn’t cover your outgoings, it might be an excellent time to explore the option of gaining an extra income.

You can do this in a couple of different ways. First of all, you can look to work more hours or pick up another job on the weekends. This could be a huge help for many people when getting out of debt, even if it is just a short term solution that could stop you from paying large amounts of interest.

4. Take Care of Your Mental Health

Although it may not be a tip for getting out of debt, it is of the utmost importance to remember to look after your mental health and emotional well-being if you’re suffering financial difficulties.

It is common for people to feel a considerable amount of shame and isolation due to debt stress. Debt, however, is not something to feel embarrassed about. Make sure you get professional medical help if you find it too much to cope with, and continue making healthy choices, such as meeting up with friends and family and maintaining your exercise routine. Only when you are in a good place mentally will you be successful in getting out of debt.

5. Get Professional Help

It is always okay to ask for help. However, getting out of debt can be complex and sometimes, professional experience is required. National Debt Support can offer expertise, debt guidance and solutions to help you take back control of your financial future.

6. Consider Your Debt Solutions

Debt Review

Debt Review is a government legislated process that forms part of the National Credit Act 34 of 2005 (NCA) which was created to help and protect people who are struggling to meet their monthly debt repayments.

Under Debt Review, your debt counsellor will formulate a new affordable monthly repayment plan by taking into account all of your income and expenses. Your debt counsellor will then negotiate with your creditors to reduce your monthly repayments (in some cases by up to 50%). Your debt counsellor will aim to ensure that your interest rates, as well as your monthly repayments are reduced, helping you pay back your creditors and become financially free within a period of 60 months or less.

Debt Review enables you to manage your costs of living and regain your financial freedom. Read our blog explaining all of the benefits of Debt Review.

If you are struggling to pay your debts, National Debt Support is here to help you manage your debt. Request a free call back today and learn how to manage your money better.

What’s the difference between “good debt” and “bad debt”?

Good debt is debt that is used to enhance your wealth. You may take out a loan to purchase something that will boost your monthly income, or its value may increase over time, allowing you to make a profit if you sell the item in the future. In addition to this, good debt may be viewed as a loan used to acquire something that has a productive value, such as buying a car to travel to work and supporting your family.

Bad debt, then, is the opposite of this. Bad debt is debt used to purchase something that will not enhance your income, will not grow in value over time, and has little to no productive value.

Sometimes, it’s not always crystal clear. What bad debt is for some may be good debt for others. For example, buying a gaming console and some video games on a store card would be bad debt.

But if that same retailer bought a large number of consoles and games from a warehouse on credit to sell in the shop, that would be good debt. Why? Because the retailer will likely make a profit on those items, allowing them to clear their debt with profit left over.

This is the essence of good debt: it is debt used to generate future returns. Other forms of good debt may include a mortgage to buy a house; a loan to start or invest in a business; money used to invest in commodities or financial assets; and money lent to businesses for an agreed interest rate, such as peer-to-peer lending. All these types of investing carry significant risks.

An important point to note is that it is only considered good debt if the growth in value or income from your asset outweighs the cost of your loan — if it does not, then it is bad debt because the cost of your loan will be more than what you are making from your investment.

What Is Problem Debt?

Problem debt is when your monthly income struggles to meet your monthly outgoings. No matter how much we earn, whether it is R1,000 per week or R5,000 per week, there will always come the point when debt becomes a problem.

If you find that a large part of your income goes straight back out to pay off your recurring debt, this is problem debt. The best solution is to pay this down as quickly as possible. The issue with problem debt is that it can quickly spiral out of control — it may only take a one-week holiday and a few missed payments for your debt to become unmanageable.

Your debt can also be considered a problem if it impacts your well-being. Debt can affect us all differently; some of us can feel comfortable owing quite large amounts, others can feel stressed and worried over the smallest amount. Therefore it is important to consider how you respond to debt.

If debt makes you feel stressed and worried, then clearing your debts may be the best option to take that worry off your mind. If you are comfortable with debts, you will also need to be very cautious because you may allow yourself to take on too much of a burden.

How Do You Deal With Debt Problems?

One of the best ways to start resolving debt problems is to begin tracking your monthly financial inflows and outflows. It is easy to lose track of what you are spending, leaving you with the impression that you have not overspent. This could be a justification for purchasing that dress or that new phone on your credit card — but if you were aware of precisely how much you had spent, you might think twice.

This is why tracking our finances is so helpful. It puts us in control, like a business finance manager, allowing us to scrutinise every expense. Instead of basing your spending on a whim, base your spending on a budget, this is far more productive. You can set aside precisely what you need for your bills, for shopping, and even for savings and investments.

How Much Debt Is Normal?

Some people have a lot of debt, some people have little debt, so there is no normal amount of debt. A better question to ask is, what is a reasonable or manageable amount of debt?

When you apply for a mortgage, one of the things the bank will want to check before accepting your application is affordability: based on your current income and expenses, would you be able to pay the additional cost of your mortgage each month?

You can use a simple ratio to figure out what percentage of your monthly income goes towards recurring debts. It is called the debt-to-income ratio, and it works like this: recurring monthly debt / gross monthly income = debt-to-income ratio.

For example, let’s say you pay R10,000 per month on your mortgage, R3,000 on your car loan and R3,500 on credit cards, and you earn R25,000 per month.

(10,000 + 3,000 + 3,500) / 25,000 = 0.66

This means that 66% of your income is being spent on recurring debt. Keep in mind that there will be other monthly expenses, such as food, clothing, household bills, car fuel, and repair bills, which vary from month to month.

Most financial advisors recommend that a good percentage is 35% or less spent on recurring monthly debts. If your debt-to-income ratio is higher than this, then it is best to try and get it down as soon as possible.

Where Can You Get Help If You Have Debt Problems?

At National Debt Support we understand that bad debt happens to good people. We know the stress, anxiety and sleepless nights which come with being overwhelmed by debt.

Our commitment is to provide the best service to our clients, helping them to manage their debt, showing compassion and earning their trust. We journey together with our clients guiding them to their financial freedom, so that they can live their best lives again.

We have a team of well-trained debt experts and debt counsellors ready to assist our clients in securing an affordable, personalised, monthly payment which will cater for all accounts. Through Debt Review, a government legislated process that forms part of the National Credit Act, we help South Africans reduce their debt repayments by up to 50%, end debt collector harassment, and legally protect their assets from repossession.

Call us on 031 010 0509, or request a free call back.

What exactly is Debt Review?

As mentioned above, Debt Review is a government legislated process that forms part of the NCA which was created to help and protect people who are struggling to meet their monthly debt repayments.

Under Debt Review, your debt counsellor will formulate a new affordable monthly repayment plan by taking into account all of your income and expenses. Your debt counsellor will then negotiate with your creditors to reduce your monthly repayments (in some cases by up to 50%). Your debt counsellor will aim to ensure that your interest rates, as well as your monthly repayments are reduced, helping you pay back your creditors and become financially free within a period of 60 months or less.

Debt Review enables you to manage your costs of living and regain your financial freedom.

Below, we look at the advantages of Debt Review:

The Benefits of Debt Review

• Legal protection from creditors 

Once you are under Debt Review, you and your assets are legally protected from repossession by the NCA. This means that your creditors cannot hassle you by calling and demanding payment. Your creditors will be legally required to communicate with your debt counsellor and may not contact you directly.

• One fixed monthly payment

Your debt counsellor will negotiate with all of your creditors and formulate a single, reduced monthly payment. This means that you will no longer have to make multiple payments to your creditors. You will only be required to make one fixed monthly payment , which will then be split across all of your creditors by your debt counsellor. What is important to note, is that this fixed monthly payment can be reduced by up to 50% of your previous combined monthly repayments.

• You won’t pay more than you can afford

One of the main goals of the Debt Review process is to help you pay off your debt whilst enabling you to manage all of your other living expenses. This means that your budget will meet your basic needs first before provision is made for your debts.

• No blacklisting 

Whilst under Debt Review, you are protected by the NCA from being blacklisted. The credit bureaus cannot blacklist you and once you have completed the Debt Review process, there is no permanent record indicating that you have ever been under Debt Review.

• No up-front fees

With Debt Review, there are no up-front fees. Your debt counsellors fees are included in your single monthly payment. Debt Review fees are regulated by the National Credit Regulator (NCR) so the fees will generally be the same for all debt counsellors.

At National Debt Support, we know that bad debt happens to good people and that most of the time it is unavoidable. Our goal is to help you on your journey to financial freedom. Our debt counsellors have used the Debt Review process to help thousands of people manage their debt and find financial freedom. We are here to support and guide you through the Debt Review process so you can rebuild your finances. All you need to do is contact us, and then we will guide you through the process.

Should your financial position change while under Debt Review, you will be able to either pay larger amounts, or even a lump-sum payment. Both of these options will allow you to conclude the process in a shorter time frame.

What Happens After Debt Review?

Upon starting the Debt Review process, your debt counsellor will all let credit bureaus and your credit providers know that you are officially under Debt Review. Your credit profile is then flagged as ‘Under Debt Review’ and you will not be able to take out any more credit for the remainder of the process, this is so that you are able to pay off all your debt without incurring more debt in the process.

After your debt is completely paid off, you will have completed the Debt Review process and you will be financially free! Your debt counsellor will then notify the credit bureaus that you are no longer under Debt Review. You will be issued a clearance certificate (form 19) to confirm that you have completed the Debt Review process so you can start rebuilding your credit score.

In terms of the National Credit Act (NCA), the credit bureaus are legally required to remove the ‘under debt review’ flag from your profile within 21 business days if being notified that you have completed the Debt Review process.

Can I Buy A House After Debt Review?

Debt Review does not prevent you from purchasing a house once you have completed the process. You will be able to buy a house after Debt Review. Once the credit bureaus have unflagged you, then you will be able to apply for credit again and make purchases under credit, whether that be for a car or a house, ect. You will, however, need to build up your credit score which may take some time.

At National Debt Support, we provide non-judgemental debt advice, tailored to your circumstances, to relieve the burden of financial stress. Stop feeling worried and powerless. Take control of your finances so you can live your best life again. Please feel free to contact us today, we are here to help you in your journey to financial freedom.