A bad cycle of debt occurs when people spend more than they earn because of poor financial planning. Picture: Pexels
South African youth like many other consumers are feeling the financial pinch of increases in the cost of living and rising interest rates.
Consumers are borrowing money to keep going until the end of the month, which can lead to debt if they don’t have finances for the repayments, according to the Momentum Unisa Consumer Financial Vulnerability Index Q1 2022.
This perpetuates the debt trap, with South Africans using as much as a quarter of their monthly income on paying back debt.
A debt trap is a situation where the amount of debt owed gets out of control. This situation arises when consumers spend more than they earn because of poor financial planning. This can become a never-ending cycle if the correct steps are not taken.
Janine Horn, financial adviser at Momentum, shares 6 ways to avoid or break the debt trap cycle:
If you cannot make payments on overdue accounts, speak to a debt counsellor who will negotiate on your behalf for revised terms on settling outstanding debt.
IOL Business
Related Topics: