Where to find help with debt

This is probably the toughest week in the year for those living on credit. Why, well the holiday season is now finally over and children are back at school and most of us are back at work. Next week is month end and by now the bills are arriving in the post or in our inboxes. Reality will hit us squarely this week exposing the collateral damage of our spending over the festive season.

Step one –Open the envelope.

No use deferring the inevitable. Debt costs more in the long run. You need to honestly assess the extent of you indebtedness.
If your debt repayments exceed your affordability even after squeezing as much as possible from your current expenses then you are probably over indebted.
The ratio to income for healthy debt is anything below 30%. South Africans at averaging 76%.
If you cannot repay the cost of the debt you should find help quickly. The problem won’t go away by itself. You need to take charge and get something going.
Sell off property and valuables. Covert watch you can to cash and pay off as much of the debt as you can.

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Step two
Contact your creditors and bring your situation to their attention. The lender would probably be better off arranging a compromise with the payment arrangements extending the debt over a longer period and reducing the repayments. In some instances arrangements can be made to service the interest only for a period. What ever you do do not apply for more credit.

Step three
Contact a debt counsellor. They are regulated and comply with the regulations of the NCA.
A useful site to get information and help from is the www.ncr.org.gov
Where to find a debt counsellor
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Useful tips to avoid debt
Here is an outline of the process provided by a Debt Counsellor – Debtrescue….

Step 1
You complete an application form and provide us with the details of all your Credit Providers.

(Consultations are usually done telephonically and by e-mail, but can also be done in person.)
Step 2
We determine whether you are over-indebted, in other words, does your monthly expenses exceed your monthly income?

(You have to be over-indebted to qualify for Debt Review.)
Step 3
If you are over-indebted, we shall inform all your Credit Providers and the Credit Bureaus that you are under Debt Review. Your Credit Providers will also be requested to provide us with a Certificate of Balance (COB) in respect of your accounts.

(You will immediately start to pay a single provisional reduced monthly installment in respect of all your Credit Providers which will be affordable to you. During the first 60 working days, legal action may not be taken against you in respect of the debts that are under review.)
Step 4
After receiving all the COB’s, we will restructure your payment plan and negotiate with your Credit Providers where necessary. After negotiations with your Credit Providers, your new restructured payment plan will be sent to all your Credit Providers and this payment plan will take effect.

(Your restructured payment plan will reduce your monthly debt repayments to an affordable amount, leaving you with sufficient money for your living expenses.)
Step 5
We will instruct our specialist attorneys to apply at court in order to make your restructured payment plan a court order. You will not have to appear in court yourself, as your Debt Counsellor will be the applicant in the matter.

(The process will now be completed and you must ensure that your monthly payments are made timeously in order to prevent Credit Providers from taking action against you.)

Use debt to get out of debt

Work off your debt

The more interest you pay the less you have to save and the more opportunity you lose to compounding your wealth into the future.

Money lenders make money out of debt through interest and time.
The longer interest is paid over time the more the lender makes.

What you can control is the duration of the loan. The quicker you pay back the loan the more you effectively save.

Credit card debt is the most expensive.
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If you are behind the curve – merely servicing the debt and not the principle sum then you are in a classic debt trap.
Credit cards are useful instruments if you understand how they work and
Using your access bond to consolidate your debt – its a great piggy bank.

Park your cash in the right spaces

Your access bond charges interest on the average daily balance throughout the month. The bank allocates a portion of your monthly installment to interest and the the remainder to the capital. The higher your average balance is during the month the less is allocated to interest and therefore more is allocated to the capital.
Effectively, you save interest the rate of the loan.

Credit cards charge interest on the balance outstanding on the card at the billing date. If you pay up you card in full or as much as possible before the billing date then you save the interest for that billing cycle.

So why not leave as much cash in your access bond during the month using your credit card where possible and then just before the billing date transfer as much cash as you can into your credit card.

You have then saved interest on your bond and then had free money from your credit card during the month. Credit cards also have no transaction fees so can be very efficient payment instruments throughout the month.

Avoid the pitfalls of spending more than earn. You need to be disciplined to always have enough in your bond to cover your credit card balance.

3 steps to getting ahead of debt

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Debt is so easy to get into and so very difficult to get out of. Prevention is always better than cure but the reality is that we get enticed into debt over time and soon find ourselves in it way too deep. The cost of debt climbs quickly and robs us of the potential to create wealth.

Institutions make their money by lending money to you at a rate over the time.
You can benefit by reversing the formula.
Interest + time = profit
You cannot reduce the interest rate but can reduce the time = less profit for institution
Less interest for institution means more savings for you
More savings for you compounded over time = more wealth for you

Here are 3 steps to getting ahead of your debt in 2014.

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A debt trap can be likened to trying to fill up a bath with the tap on but leaving the plug out.

Step one
Put the plug in by making a conscious decision to get out of debt. The culprits need to be identified and cannot be allowed to increase anymore.
Credit cards, overdraft, personal loans, store accounts, outstanding taxes. All have to stop.

Step two
Open up the tap with your disposable income. This is the money that is left over after your cost of living during the month.
Focus on living expenses. Split your expenses into ‘nice to haves’ and ‘must haves’. This is the hard work. Being honest with yourself in identifying what you need and what you can do without.
Credit cards, over drafts, personal loans, bonds, taxes owing

Step three
Keep a close eye on the water level. Divert the new found savings back into the debt instruments. Targeting the highest interest bearing one first and then working through the next.Patiently keep your living expenses well under control. A new year brings on a wave of price hikes. So your cost if living will is going to increase anyway. Squeeze those living expenses even more.