Debt Cents -getting out of debt a little at a time
Debt cents is another way to begin lowering what you currently owe. It may take longer than the debt snowballing I previously wrote about. Debt free for R40 per month extra
What is debt cents
Debts cents is where you take your minimum monthly repayment on any current debts and round it up to the nearest rand. If your payment due is R535.62, then you can choose to either pay R536 or R540.
While this may not reduce your bill by that much, each month of doing this reduces what you owe just a little more.
This is working on your current debts and you can choose to do this with all the debts you have. The most important aspect of becoming debt free is not to create any more of it!
So where possible, try and get rid of or lock up your cards and pay as much as possible online or with cash.
When you are paying online, especially if you are paying on the due date and not before, it is advisable to call the company and let them know you have paid, plus send a payment notification via email.
This avoids those unnecessary phone calls asking for payment.
Remember some transactions take 2-3 days to reflect especially over weekends.
Your credit rating is based on how well and on time you pay off your debts. If you don’t owe any money, you don’t have a credit rating. Sadly while I understand the need for companies to know if you are a safe bet as a customer, it means that we can never be totally debt free!
So how do you become debt free and still have a good credit rating?
Remaining debt free
The problem with remaining debt free is that you need to owe money in order to have a good credit rating!
So how do you do this?
There are 3 ways.
6-month interest-free card
Some stores offer you a 6-month interest-free or a 12-month account with interest charged. With the 6-month card, it is best to buy one item and then work on paying it off. Never allow this account to have a zero balance. If you don’t owe anything you are considered a poor credit risk! Avoid the 12-month option as much as possible as it costs you more in interest.
Credit card debt
Use your credit card. Buy everything through the card so that you can earn loyalty points, but know that you must be able to cover the full amount owed at the end of the month or you will be charged interest on your balance. Most cards offer 30 days interest-free, so pay on the 29th day at the latest to avoid any interest.
This is not my favourite method as the companies charge interest and you end up only being able to pay back the interest and not actually cover the initial debt.
Another way to consolidate debt is to take out a loan, then pay off all your existing debts at once and only be liable to one company. That is if you qualify for a loan large enough to pay off all your debts.
Both these methods I find a little risky. Firstly because they will both charge interest. Secondly, because it is a quick fix and you don’t develop the habit of living within your means.
Paying off your debts a little at a time and not increasing your debt even further creates good spending habits.
A little change can make a big difference!