What to do if you're stressed by debt

 

If your income has remained the same, you’re in a fortunate position. But things will remain uncertain for some time, and in these times it’s wise to minimise unnecessary spend, reduce outstanding loans and increase savings.

Nedbank’s financial experts have shared 6 handy tips to guide you

  1. Now is a great time to consider anything in your monthly spend that is non-essential (eating out, holidays, entertainment, alcohol) and redirect spend into a savings account. It’s also wise to bank the lockdown-related savings you’re experiencing, like less commuting and luxuries.

  2. Continue to pay your contractual obligations like medical aid and life insurance. You still need to protect your family and yourself in case of medical emergencies or death.

  3. Keep making any loan repayments you have. This will minimise the amount of interest you will pay over the loan term.

  4. If you have multiple personal loans in different places, think about consolidating your debt into a single personal loan, as you often save on your monthly repayments this way. To see what you could potentially save, try this loan consolidation calculator.

  5. Interest rates have fallen by 2% recently, which means that, for every R100,000 you have in debt, you now have an extra R166 in your pocket every month. Calculate how much you’re saving from the reduced interest rate and use that to pay off your debt quicker, or add it to a savings or investment account by debit order.

  6. If you haven’t had new quotes on your car or home insurance in the past 3 years, investigate whether you can get a better deal and save the difference. Contact your insurance broker to check.

If your income has dropped

If the pandemic has led to a reduction in your income, experts recommend the following course of action.

  1. Estimate how much your income has fallen and see how you can reduce expenditure by a similar amount. Here, reducing spend on luxuries is still relevant, but the more your income has fallen, the more ruthless you need to be. Things that seemed like necessities – that TV subscription or gym membership – may need to fall in the luxuries category, and you may need to downgrade or cancel these contracts for now. Next, estimate how much the reduction in interest rate helps you across all of your debt, and explore how you can consolidate personal loans.

  2. If, after this, you still have a gap, contact your bank to seek instalment relief on any loans you have with them – be it your home loan, car loan, credit card or personal loan.

  3. Finally, you may have a credit life policy on your loan which can cover some instalments if you’ve lost your job or some income.