Take Back Control of Your Debt - A 7-Step Plan to Stabilise Your Finances and Protect Your Credit Record

Take Back Control of Your Debt: A 7-Step Plan to Stabilise Your Finances and Protect Your Credit Record

South Africa’s cost-of-living squeeze has turned debt into a survival tool for many households. When everyday essentials like groceries, transport, school costs, rent and electricity keep climbing faster than salaries, it becomes easy to bridge the gap with credit - and dangerously hard to stop. The result is a slow drift from coping to over-indebtedness: you borrow to stay afloat, interest compounds, and suddenly most of your income is committed to debt repayments before the month even starts.

Food inflation has been especially punishing, and when you add rising municipal bills and utilities, many families are forced to use credit for basics rather than for planned purchases. That’s a key warning sign: if debt is funding necessities, there’s often no buffer left for emergencies, and one disruption - a medical bill, reduced hours, retrenchment, a car repair - can trigger missed payments and a downward spiral.

“Over-indebted consumers are increasingly turning to expensive credit just to survive and cover daily essentials like food,” says Ian Wood, CEO of Alefbet Collections & Recoveries. “With debt servicing costs remaining high, many are finding themselves deeper in debt, and distress, each month.”

The group includes collections firms Shapiro Shaik Defries and Associates , ITC Business Administrators, and Metropolitan Revenue Collections, and works with both creditors and consumers to reach practical, workable repayment solutions.

Whether you’re dealing with a lender directly or via a collections partner, the principles for getting back in control are the same: act early, get realistic, and protect your credit profile while you stabilise.

Why silence is so expensive (and how it hurts your credit)

When money is tight, ignoring calls and emails can feel like self-protection. In reality, it usually makes things worse. Missed payments can lead to penalty fees, default interest, and eventually legal collections - which adds costs on top of what you already owe and can do long-term damage to your credit record.

“Many people don’t realise how unpaid debt devastates their credit score and their future financial health and mobility,” explains Wood. “An impaired credit record doesn’t just mean higher interest rates - it can mean outright declines for finance, preventing you from buying a home, a car, or accessing credit when you truly need it. And when debt moves into legal collections, additional costs are added to what you already owe, creating an even heavier financial burden.”

The point many consumers miss is this: creditors often prefer a realistic restructure to a drawn-out, costly recovery process. They may be willing to adjust instalments, extend terms, or revise payment dates - especially if you engage before you default and can demonstrate a plan you can actually stick to.  “Creditors understand that economic conditions are tough,” says Wood. “They’d rather work with you to find a manageable payment plan than go through costly legal processes. But you need to take the first, proactive step and engage.”

A practical 7-step plan to regain control (without panic)

Step 1: Contact creditors early — and respond when collectors call

The best time to negotiate is when you still have options. As soon as you see you won’t meet a payment, contact your creditor and explain the situation. If a collections agent reaches out, engage instead of avoiding them - they can often facilitate a restructure discussion. The goal is simple: stop the situation from escalating while you still have negotiating room.

Step 2: Build a “survival budget” for 30–60 days

Forget perfect budgeting. You need a short, strict plan that prioritises housing, food, transport to work/school, utilities, and essential insurance. Everything else becomes optional for now. This isn’t forever - it’s a reset period to stop financial bleeding and create space for repayment and recovery.

Step 3: Target high-interest debt first (and don’t open new credit)

High-interest credit (often unsecured lending and revolving credit) grows the fastest. Put extra money toward the debt with the highest interest rate while paying minimums on the rest, then roll that freed-up payment into the next highest-interest debt. At the same time, avoid taking new credit to cover old credit - that’s how long-term cycles form.

Step 4: Treat home-loan consolidation with extreme caution

Using home equity to consolidate can look attractive because the rate is usually lower - but it shifts short-term debt onto long-term secured debt, and it can put your home at risk if your situation worsens later. If you consolidate, make sure the numbers truly work: include arrears, adjust instalments properly, and understand the long-term cost. “Keeping the same bond payment” while adding more debt can quietly stretch repayment and become very expensive.

Step 5: Understand debt review before you commit

Debt review can be a legitimate route for some consumers, but it’s not a quick fix. Once you enter debt review, you generally can’t access new credit until debts (excluding the home loan) are settled, and it can take years. Even if your income improves, you typically remain in the process until the programme is completed. Work only with registered debt counsellors and verify registration with the National Credit Regulator. Also factor in the fees and the long-term commitment before you sign anything.

Step 6: Check for credit insurance or retrenchment cover

If you’ve been retrenched or suffered an income shock, check each account for credit insurance. Some policies cover repayments for a defined period (often up to 12 months) if you meet the claim requirements. This can buy you breathing room while you look for work or rebuild income.

Step 7: Protect your credit record like an asset

Your credit score isn’t just a number - it affects what you’ll pay for finance, whether you’ll be approved, and what terms you’ll get. Early engagement, realistic restructuring and consistent repayment are the best ways to prevent accounts from deteriorating into more severe stages of recovery that can leave a lasting mark.

The goal isn’t perfection - it’s momentum

If you’re overwhelmed, start with one action today: list your debts, pick up the phone, and open the conversation. A temporary financial shock doesn’t have to become a long-term disaster - but it often does when people freeze, avoid, and hope it will resolve itself. The consumers who recover fastest are the ones who face the reality early, cut hard where they need to, and negotiate repayment terms they can sustain. Pride and fear are expensive. Action is cheaper - and it’s how you regain control.

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