When short-term credit is a long-term problem
Joburg – Saving can prevent you from becoming sucked into debt.
Short-term loans that serve as quick cash to meet emergency expenses are getting consumers sucked into a debt spiral.
This according to Arthur Hlubi, legal and compliance executive at Bayport Financial Services. He said most payday loan takers, despite their best intentions, do not manage to settle their debt. They fail to take into account the high interest and other fees associated with these loans, which significantly inflate the amount to be repaid in a short time.
Read City denies writing off R15.6 Billion worth of debt
“While there are people who do repay the full loan when they get their salaries, unfortunately, they are in the minority,” said Hlubi.
“As a result, consumers regularly need to renew or roll over the loan with the hope of settling it the following month. But next month comes with its surprises and interest and the amount owing keeps adding up.”
He said the debt cycle sucks many consumers in and eventually leaves them with almost no room to manoeuvre. Hlubi’s advice is that they should find help as soon as they realise they are not making progress towards settling a loan.
“The biggest mistake is to keep hoping that next month will be different. The sooner you get help, the sooner you can get out of debt. If you let the loan run, the repayments will eventually become completely unmanageable.”
Read Property buyers saddled with historical municipal debt
How to escape the payday debt spiral:
- Before taking out a short-term loan, consumers should go to someone who can help them get a complete picture of their finances
- Have an emergency fund that can get you through tough times
- Consumers should also take control of their finances by drawing up a budget and, importantly, keep a record of their spending.
“Even if you start with a small amount, saving should be budgeted for like any other expense,” he said.
“Furthermore, the psychological impact of knowing that you have a safety net in case things go wrong is a hugely positive influence.
Add us on Whatsapp for the latest news by adding 079 4395 345 to your contact list and just send your name and surname to us so we can save your number. Click here to find out more about our Whatsapp policy.
