How to get out of debt

Debt consolidation is when you take out a new loan to pay off a number of existing debts, normally unsecured debts such as a credit card, an overdraft, personal loans or store clothing accounts
Debt consolidation is when you take out a new loan to pay off a number of existing debts, normally unsecured debts such as a credit card, an overdraft, personal loans or store clothing accounts

The household debt levels in South Africa are staggering. According to the debt counselling firm, DebtBusters, the average debt counselling client earning more than R20 000 a month is spending 64% of their income on debt repayments. A whopping 64%.

Debt-to-income ratio is the percentage of your monthly income that goes towards paying your debt. A healthy debt-to-income ratio is no more than 35%.

If you think about this figure, compared with the 64%, it is scary.

Debt can feel overwhelming, especially when you have multiple debts, such as credit card accounts, personal loans, overdrafts and a balloon payment waiting at the end of the contract period. Carrying debt is burdensome; it doesn’t just affect your finances but your health and family life as well.

Getting out of debt is not an easy task but it can be done. It takes commitment and a plan to become and stay debt free.

With these strategies you can take control, know you’re making progress in paying off your debt and save money on the interest.


No matter how insurmountable your debt might seem, you have to face it head on. First, you have to list all of the debt you have. You can obtain this from the monthly statements your creditor sends.

A lot of people do not do this exercise because they are afraid to face just how much in debt they are. This reminds me of what behavioural scientists call the “ostrich effect” – this is when you avoid apparently risky situations by pretending they do not exist.

I find that once people can quantity exactly how much they owe, they become better equipped to come up with a plan of how to pay off the debt. That is why I love the quote by Peter Drucker: “If you cannot measure it, you cannot improve it.”



1 - Pay off the highest interest rate first

This is the most recommended strategy of paying off debt because this is the debt with the highest interest rate – the one that is the most costly. So it makes sense to try to direct your extra funds to these while still paying the minimum payments towards all other obligations.

It is clear from the example above that the debt you will tackle first is the overdraft, then the personal loan, credit card from Bank 2, credit card from Bank 1 and lastly the store clothing account, in that order.

When focusing on paying off debt, it is imperative to remember to keep on paying the minimum repayments of all other debts. Do not stop paying one to focus on another. If you miss payments, this will reflect on your credit report, setting you back.

2 - The ‘snowball’ method

With this debt-reduction strategy, you pay off debts in order from smallest to largest, gaining momentum as each balance is paid off.

Using the same example as above, if you apply the snowball method, it means that you will pay off your debt in this order:

1) Store account R8 000

2) Overdraft R20 000

3) Personal Loan R22 000

4) Credit card: Bank 1 R40 000

5) Credit card: Bank 2 R50 000

The rationale behind this method is the psychological effects of paying off debt. When you set the goal to pay off a debt and you achieve it, it feels amazing.

This will motivate you to keep on going until you pay off even the larger amounts. And I have seen this method work often.

Where do you get the extra money to pay off debt, you might ask?

First, you have to draw up your household budget and keep track of where your money is going. You will find that there is extra fat – wastage – in your budget that can be used to pay towards your debt.

Another way is to use a cash windfall, such as your bonus, tax refund or an inheritance to accelerate or, if the amount is big enough, wipe out your debt completely. However, I find this is often a temporary solution because people do not really get to the root of the problem of why they fell into debt. They do not fix their habits.

Last, you can start a “side hustle”, where you offer your services or sell goods outside your normal working hours to make extra money. With the help of social media, there are a lot of options available to reach your target market.

Debt does not have to be a disease you carry around with shame and anxiety. If you are sick and tired of living with debt, you can make a plan to get out of it and start taking control of your life. It can be done.

Credit card: Bank 1R50 00018%
Credit card: Bank 2R40 00019%
OverdraftR20 00022%
Personal LoanR22 00021%
Store accountR8 00016%

Maya Fisher-French
Personal finance journalist
City Press
p:0117139001  e:
Rise above the clutter | Get the best of City Press delivered to your inbox | Choose your news

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24


Read the digital editions of City Press here.
Read now
Voting Booth
Two years after André de Ruyter joined Eskom, South Africa is experiencing its worst bout of load shedding. Is he to blame?
Please select an option Oops! Something went wrong, please try again later.
No, he got in late
77% - 49 votes
6% - 4 votes
Fire the whole lot
17% - 11 votes