MANAGE DEBT
These days, it seems everybody is buried in debt. Just look around at the throng of microfinance companies that have surfaced in the last five years or so, and you’ll begin to grasp the magnitude of our debt problem. Though microfinance companies have been labelled loan sharks, their debt consolidation offerings are considered a viable option to getting rid of those piled-up debts. The thing to remember is that, though they are easy to acquire, they come with a high price tag with interest rates as 30 per cent because of their high-risk, unsecured nature. By combining all your obligations into one monthly payment, debt consolidation allows you to take control of those runaway credit card statements, spiking car loans and out-of-control bills.
Dean Rhoden, customer service officer at C & WJ Co-operative Credit Union, gave ‘How To’ some useful tips for consolidating your debts:
Check your credit reports and get your credit score, if possible.
Know whether you are in good standing with financial or lending agencies with which you have done business in the past.
Take stock of your debts.
Sit down and pencil out the number of institutions you owe and the amount to be repaid. Note, personal debts are not honoured and all debts have to be with institutions, eg, furniture stores, banks, etc.
Check out your debt consolidation options.
Determine which financial/lending agencies offer the most attractive interest rates and the payback period and find out if the rate on loan being consolidated is lower than that being sought.
Apply for a debt consolidation loan.
Approach your lender after you have narrowed down your field of lenders for your consolidation loan and learn all you can about their lending requirements, gather all the documents required by your lender for your loan: List of all debts owing Letter of employment Last three payslips Proof of address A guarantor (optional in some cases) Breakdown of all your monthly expenses
Consolidate your debts.
Make sure to account for all you owe, check which debt has the higher rate and be sure to prioritise paying off those loans first.
Pay off loan as fast as possible.
Pay a little more each month if you can. The sooner you pay off your loan, the faster you can take back control and return to a financially sound footing.