Practical hints to manage personal debt

According to Glen Jordan, director of financial services provider IMB, South Africans continue to suffer from what many are calling a 'debt hangover'.

The collapse of the African Bank in 2014, crippled by rising costs and unpaid loans, forced the South African Reserve Bank to step in in order to resolve the issue, but it signalled a worrying trend engulfing the country: too many South Africans are in debt and the trend is simply not sustainable.

Jordan says South Africans have been spending without thinking of the consequences, causing a never ending spiral which they struggle to get out of.

Over-indebted consumers

"The Western Cape provincial manager, Karam Singh, illustrated the issue and revealed that more than 11 million of South Africa's credit-active consumers are over-indebted. Several micro lenders have been assigned a large chunk of the blame and are the cause of the financial headache amongst consumers. Citizens are struggling to repay loans, which could lead to a backlash from the public as interest rates soar," he says.

He further adds that debt has become such a problem that consumers have resorted to taking new loans in order to pay for previous loans. "This can be attributed to many factors which include the continuous rise in living costs as well as the tendency to spend impulsively. A nationwide cash shortage is also to blame for putting consumers in a spiral of debt."

Standard Bank also released statistics that only 42% of South African adults have a plan in place to save money. The remaining 58% are left with no life ring should the debt tide rise.

All is not lost

Jordan states that all is not lost for consumers who feel they are caught in the debt spiral. "At IMB we specialise in curing the debt hangover by looking at solutions to assist in minimising debit. These can range from the protection of debit orders, credit and debt management, to personalised perspectives on how to get out of debt. It is possible for everyday South Africans to extricate themselves from debt."

Jordan provides five practical tips on how to start getting out of debt:

Don't postpone - do it now. We all need more money, every month. Don't wait until you can't afford to make a repayment. Make the move and reduce your debts immediately.
Accept help. If you can't reduce your debt and don't know how, help is available. There are people and organisations that specialise in this field. It's never a completely hopeless situation.
Take a long-term view. Many of the professionals able to help you with debt will ask for upfront fees. Look for a service provider with whom you can form a long-term relationship. If they take fees upfront, they aren't with you for the long-term.
Take back control. Do you have debit orders? Do you actually know what each debit order is for? Do you know much each one is? Are creditors harassing you? If so, it's time to take control of your own finances. Ask for help on this if you're not good at it.
Use your savings wisely. By reducing your debt repayments, you'll have more money every month. Save some of the extra money so that you can try and avoid borrowing in future.