Preventing debt is the smartest way that a consumer can prevent a financial crisis or over-indebtedness. In South Africa debt counsellors exists to help consumers relieve themselves of over-indebtedness by assisting them in the restructuring of their budget. By doing so debt counsellors help consumers see where they went wrong, and once the causes have been identified, debt counsellors negotiate with consumer’s creditors. These negotiations result in lower payment terms, lower interest rates, and the prevention of legal action from the creditor. However this remedy is only for those consumers who are already in debt trouble and need help to get out of it. The question begs though, who can help you prevent debt? The answer is simple: only you can.
It is within the power of the consumer to prevent themselves from falling into debt by managing their finances carefully and understanding what smart debt choices are. Certain debts such as vehicle finance and mortgages are unavoidable and considered good debts, however other debts that do not contribute to your financial portfolio are bad debts.
In order to prevent falling deeper into debt always have a rainy day savings fund and keep adding it to it. This can prevent bad luck expenses such as a broken car or computer from forcing to you to use bad debts such as credit cards or short terms loans to pay for it. It can also help you save up for items that are normally purchased using store credit.
Always pay your debts on time to prevent late penalties and added interest. This will help to pay off existing debts sooner, whilst ensuring that the minimum payment does not increase. And add an extra 10% to every payment, as this will end a debt sooner and create a better credit score.
It is important to know that help to get out of debt exists in the form of debt counselling, however if a consumer is smart and avoids the pitfalls of bad debt, they can prevent falling into debt and needing that help.
Article written by: Andrea van Tonder 06-2013