Overcoming the cycle of debt

By PETER KAMURI

What do you do when you get entangled into runaway debt?

Do you run away from your creditors? Do you switch off your mobile phone and try as much as you can to remain invisible?

Different people cope with debilitating debts differently. What many forget is that having debts is a way of life. We want money to pay for our utility bills, house rent, or even meet expenses for our children’s education.

As we continue to live in these lean times, it is possible to have multiple creditors.

Managing these debts at times is not easy. But with careful planning, you can come up with a better ways of dealing with your creditors.

The moment you fall into debt, what some people forget is that they should constantly appraise their creditors on what they are doing to ensue they pay up.

“Keeping of from your creditors cannot resolve your problems. You even create room for them to start speculating that you want to abscond repaying,” says Powell Olwanda, a debt collector working with a private city firm.

Creditors touch
Olwanda says failing to keep in touch with your creditors, creates an impression of not wanting to repay debts or simply you do not care.

Keeping in touch with them creates confidence in them and remind them you are concerned and you will repay when situation improves.

“Never decline to take calls form your creditor. When they write to you, file the letters and where necessary reply to them and explain your situation.

Failure to do this is considered discourteous and your debtors can turn to sterner actions,” he adds.

Olwanda further advises, “As you plan to deal with your creditor, start by preparing a schedule of all the people or the institutions you owe money.

Indicate how much is due for each and then come up with an arrangement on how you will repay the money.” He says one can decide to start repaying the oldest debts or that owed to the most uncooperative creditor.

The other option is by distributing payments across the board. You can pay an equal percentage of each debt or just assign a standard amount for all the cases.

Janet Kimingi, a financial advisor says it is important to prioritise repayment of debts that attract the highest interest or penalties.

These are the ‘priority debts’ as the consequences of not repaying them can be dire.

She says a bank loan, for example, can easily make you lose a collateral or damage your reputation through poor credit rating.

“If your creditor is a banking institution, you can book an appointment with the manager and explain your situation. You can even renegotiate your repayment period and as for more time.

The amount of money payable every month can also be reduced or interest be frozen,” she adds.

“However, the repayment should be pegged on the amount you can afford to repay. That is why is important to draw a budget to act as a guide. The budget will help you to list your earnings and all your expenses, making it easy to know how much you can spare,” says Kimingi.

“The best advice is to distribute the money you have amongst your creditors fairly. Make your payments as per the amount of money you owe to each one of them but do not give to pressure to pay what you cannot affords,” she advises.

“In situations where your creditors handover your case to people who collect debts, do not give in to pressure and over-commit yourself. If the matter ends up in court, seek for advice from experts to help you handle the matter,” advises Olwanda.