How To Deal With Debt

Debt is a topic many of us aren’t comfortable discussing, so we tend to keep our struggles to ourselves and bear the burden on our own. This results in a constant state of worry and fear, which can affect our health, relationships, job performance, and how we function in our day-to-day lives.

Everyone with even a little bit of debt has to manage their debt. On the other hand, when you’re carrying a heavy debt load, you have to put more effort into paying off your debt while juggling payments on the debts you’re not currently paying.

If you find it hard to pay your debt and other bills each month, here are some steps you could take:

Calculate Your Debts

If you’re trying to figure out how to manage your debts, a good starting point would be to make a list of how much you owe and to which providers, and how much you pay in fees and interest to each.

While this could be a slightly unpleasant wakeup call, it will give you a clear view of exactly what you are faced with, and how different interest rates and fees could affect the amount you pay back.

Know Your Income vs Expenses

Apart from identifying exactly what you owe, it may also help to know exactly how much money you’ve got coming in, how much money is required for the essentials and where the rest of your money might be going.

This will help you identify where there may be room for movement and where you could add a little bit extra to your repayments.

Consider Debt Consolidation

To consolidate your debt, you get a single loan to pay off your other loans, leaving you to make just one payment to a single creditor each month rather than making multiple payments to multiple creditors.

Pros for consolidating your debt:

  • Make your debt easier to manage: Take control of your situation and reduce the stress of managing multiple payments with different due dates.
  • Cut your interest charges: By settling high-interest debts with a lower-interest loan, you can reduce the money you burn in interest.
  • Reduce your credit utilisation score to improve your credit score: By paying off multiple debts through consolidation, you will improve your credit utilization score by using less of your available credit, and therefore improve your credit score.

Cons for consolidating your debt:

  • May entice you to put new debt on your zero balance credit cards: Once you have cleared your credit cards to a zero balance, it can be tempting to start making new charges on them, which will increase your overall debt. Some people cut up their credit cards to prevent this behaviour from happening.
  • Not every debt consolidation offer improves your interest charges: Make sure to move credit card debt from higher APR credit cards to lower APR debt consolidation loans or balance transfers.
Young man looking inside his empty wallet

Get Advice from a Debt Counsellor

Discussing money doesn’t come naturally to many of us and it’s never easy admitting you have a debt problem. Being in debt may feel overwhelming, but help is always available.

No one is saying that managing your debt is going to be simple, but once you face up to the problem, you may be surprised just how quickly you can start making a difference.

Debt counselling pros

  • When you are in debt counselling, creditors cannot take action against you
  • There is no permanent record of having undergone debt counselling
  • There is only one monthly repayment to be made
  • Your budget will meet your basic needs first before provision is made for debts
  • You will never pay more money than you can reasonably afford
  • A debt counsellor will suggest ways of cutting costs and saving money
  • You will no longer get calls from your creditors demanding payment

Debt counselling cons

  • You are not allowed to have more credit while undergoing debt counselling
  • It does cost a little bit of money, but the fees are set by law
  • Your debts might take longer to pay off as a result of paying smaller amounts each month

But by making a plan to pay off your debt, sticking to a new budget, and being open about asking for support, you’ll get through this.