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MONEY CLINIC | I can’t pay off my credit card debt. Should I take out a consolidation loan?

The more you are able to repay your outstanding debt, the sooner you will become debt free.


A News24 Business reader struggling to pay off credit card debt wants to know if a consolidation loan would be his best bet. He writes:

I’m 63, still working full time and need credit card debt advice. I have three credit cards – all max as long as I pay the deposit and need to use available credit throughout the month. I would like to know if it is better to get a consolidation loan and settle these accounts in terms of interest or will I be worse off? My credit score is 671 and none of my accounts are overdue. The balance of the three credit cards, including a store card, is R65,000. The monthly interest including charges is R985 and the monthly payments I make are R4,000.I managed to pay off all the personal loans, store cards, etc., but I can’t settle my credit card debt, and it doesn’t help that the banks are ignoring my request to lower my limit. zero credit.Please inform me that my monthly income is less than my debts, I have taken a side job to make ends meet, but it is still not enough.

Neil Roets, Founder and CEO of Debt Rescue, respond :

There are several ways to approach a debt settlement situation. Although consolidation loans are an option, it is very important to consider two main factors – the repayment term and the interest rate, as it could end up costing a lot more. The very first step is to establish a budget, dividing your information into three columns: all income; all expenses (excluding debts and including items such as rent, food, transport, insurance); and finally the debt (minimum monthly payments).

This is the clearest way to see where changes can be made to spending, but also to ensure that there is no need to continue using credit cards in the future, while trying to repay them. And also, to identify the extra amount available to start repaying the accounts one by one.

Once done, the best way to handle this situation is to start with one account and focus on settling it as quickly as possible. This would involve paying the required minimum on the other two and putting additional funds into the identified account, which should either be the one with the highest interest rate or the highest outstanding balance. Once this account is then released, close the account, then take all the amounts that have been paid into the identified account, and apply it to the next one, and do the same once settled.

Questions may be edited for brevity and clarity.