Page 18 - TODAY magazine Issue 1 2021

YOUR LIFE // DEBT MANAGEMENT
5 signs that your debt is out of control
It’s easy to bury your head in the sand when it comes to debt. When these red flags appear, though, it’s time to take urgent steps, says Brendan Dale.
There’s a fine line between being able to manage your debt and not being able to. Here are a few warning signs that you’re on the edge of a cliff with regard to your debt.
ROBBING PETER TO PAY PAUL
Robbing Peter to pay Paul simply means taking money from one place to pay for something else by, for example, using your rent money to pay school fees. You then quickly find that you desperately need to pay rent, so you pay it with the money that was meant for groceries. It’s a vicious cycle and a sure sign of an even worse crisis looming. A budget and a payment calendar that shows what is due when could help you to manage your payments better.
BOUNCING DEBIT ORDERS
Bouncing debit orders are a clear indication of financial distress. It’s made worse, though, by the hefty fees (up
to R80 per transaction) most banks charge when this happens. On top of that, you could incur interest or fees for non-payment with your creditor – the store or bond provider – and so it goes from bad to worse.
It helps to keep a list of all your monthly debit orders and the dates on which they go off your bank account to be able to plan better.
RING, RING!
If your creditors have begun to phone you, you know you’re in trouble. You should take these calls seriously and work with them on a plan to deal with your debt. Take the opportunity to understand exactly how much you owe, the interest that is charged and all other fees that may apply.
Whatever you do, don’t ignore creditors’ calls. Talking to them shows that you’re willing to repay your debt, which usually counts in your favour, and you may be able to negotiate a better payment plan, which will give you a little breathing room.
MAXING OUT YOUR BUDGET FACILITY
Using your credit card for day-to-day expenses is one thing, but using the budget facility comes with additional charges while creating the illusion that you have money to spend. Nearing the limit of your budget facility should be of great concern to you as this indicates that you are very close to the end of the line.
Debt is expensive and the budget facility on your card is probably costing far more than you imagine. Take the time to understand the consequences and costs of using it.
DODGY LOAN SHARKS
If you’ve exhausted your options with mainstream credit providers like banks, being forced to go to loan sharks, payday loan providers or other less reputable finance providers should be a big red flag.
Request a free credit report from a company such as Experian or TransUnion and take a good look at your debt. There are ways to improve your credit score and doing so will help you cultivate healthy financial habits and slowly but surely break free from dodgy lenders.
NEED ADVICE?
Contact an
Old Mutual financial adviser on 0860 60 60 60 or find one here.
// 16 // ISSUE ONE 2021
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