Question 1

What is the difference between the snowball and avalanche methods?

Accepted Answer

The snowball method pays off debts from smallest balance to largest, regardless of interest rate. The avalanche method pays off debts from highest interest rate to lowest. Snowball gives you quick psychological wins; avalanche saves you the most money mathematically. Both methods require you to pay minimums on all debts and direct extra payments to one target debt.

Question 2

How much extra should I pay toward my debt each month?

Accepted Answer

Any extra amount helps, but aim for at least R500-R1,000 per month above your minimum payments. Look at your budget for non-essential spending you can redirect: unused subscriptions, takeaways, or impulse purchases. Even an extra R200 per month can shave years off your debt repayment timeline and save thousands in interest.

Question 3

Should I consolidate my debts into one loan?

Accepted Answer

Debt consolidation can make sense if you can get a lower average interest rate. For example, if you have multiple store accounts at 20-24% interest, consolidating into a personal loan at 14-16% saves money. However, be careful: consolidation only works if you close the old accounts and don't rack up new debt. Many South Africans consolidate but then re-use their store cards, ending up worse off.

Question 4

What is debt review (debt counselling) in South Africa?

Accepted Answer

Debt review is a legal process under the National Credit Act where a registered debt counsellor negotiates reduced payments and interest rates with your creditors. While under debt review, creditors cannot take legal action against you. However, you cannot take on new credit until the process is complete, and it remains on your credit record. It's best suited for people who are severely over-indebted and cannot meet their monthly obligations.

Question 5

How long does it take to become debt-free in South Africa?

Accepted Answer

It depends on your total debt, interest rates, and how much extra you can pay. The average South African with R60,000 in consumer debt paying R500 extra per month can be debt-free in 3-4 years. Without extra payments, the same debt could take 8-12 years due to compound interest. Use the calculator above to see your specific timeline.

Question 6

What happens if I miss a debt payment in South Africa?

Accepted Answer

Missing a payment triggers late fees, penalty interest, and a negative mark on your credit record with credit bureaus (TransUnion, Experian, XDS). After 3 months of missed payments, your account may be handed over to a collections agency. After 6 months, the creditor may obtain a court judgment against you, which can lead to garnishee orders on your salary or attachment of assets.

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