Money Wise: Tips For Managing Long Term Loans the Right WayApr 30, 2019
Consumer debt in South Africa has soared to R1.7 trillion. About 25 million adults in the country find themselves indebted to one or more financial institutions. In a country with less than 58 million inhabitants (including children), that’s a big percentage of the population.
Are you one of those struggling South Africans? Are you wondering how to manage your long-term loans and create a plan to get out from under them? Check out these tips below so you can start seeing that light at the end of the tunnel.
1. Make Your Payments On Time
This one is so basic should we even mention it? But 40% of debtors in South Africa are behind on their payments.
It’s understandable that some months money is tight and it’s hard to make those payments. But make paying them a priority, or things will only get more expensive.
Extra interest and late fees will pile on top of your original amount, making it even more expensive and harder to pay off.
2. Use Automatic Payments
If you find that you forget to make your payments, try setting up a direct debit. The payment will automatically come out of your account each month.
How will you know that you have enough money in your account to pay it? Set up your loan payment to come out in the first couple of days after you get paid. The goal is to make sure it comes out of your account before you can spend it on something that might not be that necessary.
3. Save a Little, Save a Lot
Speaking of unnecessary things, make a plan to save money. Little splurges here and there can add up quickly. Big splurges like that vacation you so badly want to take make a huge difference.
The fact of the matter is that saving a little more and putting it towards your debt pays off bigtime. The longer it takes to pay off, the more interest just keeps piling up.
Plus, once you pay off the loan, all that money that you were spending on payments is suddenly freed up. You’ll feel like you suddenly got a huge raise! Now you can take a bigger, better vacation and enjoy yourself all the more knowing that you’re debt-free.
4. Consolidate Your Debt
There are various loan options with rather favourable terms designed to help you get out of debt. Take out one loan to pay off several small loans. Then you can make one payment each month and focus all your efforts toward this consolidation loan.
Be smart if you’re going to go this route. If you don’t trust yourself this may not be a good route for you.
The lender doesn’t send the debt consolidation money to your current lenders. You get the money and are supposed to use it to pay off your debts. Some people blow that money on a new purchase and end up in a worse position than they were before.
Managing Long-Term Loans
Handling your long-term loans is not impossible. It can be difficult and you may have to give up a few creature comforts in the meantime. However, once you’re debt-free, you’ll breathe easier and be able to more fully enjoy the money you have on hand.
Want to understand more about debt? To learn the difference between good debt and bad debt, check out this post.