Different kinds of debt exist: car and home mortgages, student loans, medical loans, creditor/money lenders, credit cards, and more — some better than others. But a lot of these credit systems are not properly structured in this part of the world, and so managing debt is especially tough for Nigerians.
However, there are a couple of institutions Nigerians trust if they need to secure quick loans, like the popular microfinance banks and loan apps. But quick loans, as we have learnt from the plethora of horror stories about them in our Money Mistake series, are not always the best option.
While the funds might help to solve an immediate, dire problem, it creates a whole new world of issues for the debtor. Too much debt can lead you closer to penury by the day. It could make it hard for you to pay your important bills, lead to more debt, and affect your mental health overall.
6 Tips for Managing Debt
Considering everything we’ve mentioned above, we’re sharing a few tips below that can help you handle any size of debt properly:
1. Understand the nature of your debt
Create a list of everything you owe and come up with a clear figure. Study your loans. Know the loans which are higher up on the priority list, with your focus on the high-interest ones. Will your debts inhibit your ability to pay crucial bills? How can you turn this around? Armed with this information, you can make better decisions about which loans require immediate attention and which ones you can let up on for the time being.
2. Add a repayment plan to your budget
Look at your debts as one of your bills; an expense that must be paid as your wages roll in. Make sure your budget enables you to at least pay the minimum repayment amount at the stipulated time. As with all budgets, you’ll make better and more convenient adjustments with time.
3. Increase payments
If possible, devote more money to lessening your debt. If you pay more than the minimum rate, you can reduce the duration of the loan. If you have no more cash to spare even after cutting back, it might be a good time to consider upping your income. Work on positioning yourself for raises at your place of work, or switch to a higher-paying job to furnish you with more money to pay off your debts.
4. Have conversations
Send emails, write letters, and make calls to your creditors. Especially the priority ones. You may be able to negotiate a better repayment plan. Don’t forget to talk to your loved ones as well. They may not necessarily help you clear the debt, but they can offer moral support, and it will ease the pressure on you if you’re the main provider of the family.
5. Cut back on spending
When you’re drowning in debt, it’s awfully counterintuitive to spend like you’re not. Do yourself a favour and trim your entertainment budget until you’re no longer at risk of being harassed by your creditors. Eat in if it’s cheaper, say no to nonessential outings that will cost you a lot, and stop impulse buying. Stick religiously to the budget you created for yourself.
6. DO NOT take out more loans
We shared the story of a school teacher who resorted to loan apps to help pay back loans he took from other loan apps during the lockdown. Spoiler alert: he’s still servicing them. It may seem like the easy way out, but if you can’t already pay off the loan at hand, what makes you think you can pay for a bigger one? Unless it’s life or death, please don’t do it.