Having access to credit can be advantageous in many ways. Not only do you have access to extra cash in emergencies, but you can also pay the money back gradually, with added interest of course.
It’s important that you avoid getting caught in a debt cycle however.
What is a debt cycle?
This is continual borrowing that leads to increased debt, increasing costs and eventual default.
How do you get out of the debt cycle?
The first step towards getting out of debt involves acknowledging that you have too much debt. You can than move on towards taking action and working on solutions to reduce your debt.
Understand your finances
It’s important for you to be clear about how much you’re bringing in and how much you’re spending. Create a spending plan so that you know how much you are allocating towards spending. Make sure that you stop using your credit cards and that you use your debit card instead.
Change your habits
If it means that you reduce your spending by completely changing your habits, this could be a good way to get out of the debt cycle. If you are spending hundreds of rands on drinks every week, you could opt for allocating this money towards paying off debt instead.
Cut your borrowing costs
One way of doing this is by consolidating your debt. This way you could lower your interest rates and get out of the debt cycle faster.
Get a part-time job
By getting a part-time job you could bring in additional income. You could use the money earned to pay off your debts, helping you get out of the debt cycle faster. If this isn’t an option, overtime at your current job will help.