Five ways to pay off debt faster despite inflation

Last year, things went well for South African consumers as food prices were finally reduced. This year, the world economy is in a precarious state. Gasoline prices are about to rise, and electricity prices are on the way. We’ll show you how to pay off debt fast, protecting your wallet and sanity along the way.

Here’s why it’s important to get out of debt

When you are in debt, you tend to have high stress and anxiety levels, which affects your daily life. Debt affects your cash flow, leads to higher costs, and means you can’t save for your future. Debt reduction means you have better financial security and resilience when things don’t go according to plan.

How to get rid of debt fast

We share five steps that will put you back in control of your finances.

1. Make a budget

Having a clear idea of ​​your income and expenses is the first step to managing your money.

List your essentials – accommodation, transport, school fees, groceries – and your existing debit orders. Now, add to your usage as you see fit – such as takeout, entertainment, etc. And check your subscription – those small fees add up!

You can check your bank statements to identify the average amount you spend on vacations, vacations, and entertainment. While we don’t suggest you cut everything in this category, anything you save here can go toward reducing your debt.

2. List all your debts by interest rate

Include, for example, mortgages, car loans, any other loans you may have, credit cards, and buy-now-pay-later plans. And here’s the hack: write down the interest rate for each of these again.

We don’t usually think of the interest rate, but you can think of it as the amount of the loan. The money we receive – the capital – is the amount we borrowed at the beginning, while the total amount paid for the loan is higher, because it includes the interest charged on the capital.

High-interest debt should be your first priority. Tip: it’s usually your credit card, payday loan or personal loan. Paying this off first is the best way to pay off debt quickly.

This is where the rubber hits the road. You’ve done the analysis, you know how much extra money you can pay, and you know where it needs to go – maybe your credit card or another short-term loan. So now you have to commit. Anything extra you can pay will help you pay off credit card debt faster. Prioritize paying off this debt while making smaller payments on your other debt.

Once your credit card is paid off, you can then allocate those payments to your next high-interest loan – and so on, and so on.

4. Don’t get into more debt

I know, I know… it’s so tempting. Your favorite store is having a 40% off summer sale. Your friend goes overseas and can bring back goodies. You just need to add R200 to your cart to get free shipping.

Wait. Don’t derail your efforts by spending a lot of money on your credit card just as you’re trying to pay it off. Your wallet will thank you.

Sometimes we are in too much debt. Check if you have excessive debt with our debt calculator. If your debt is so high that you can’t afford monthly essentials, you may be eligible for credit counseling. This is a legal process where debt settlement is renegotiated with creditors, and you are protected from creditors while paying off debt. You will still have to pay the full price.

Get a free quote here.