Dumisani asks: I am paying a monthly instalment for a TV and entertainment system at a furniture shop. I skipped three months of payments at some stage. Now I have increased my monthly instalments by R200. I have been paying for these items for some time now, but I do not seem to finish. I am now thinking of loaning from the bank just to pay it off. Do you think this is wise or should I just continue paying without taking out another debt with the bank?
Maya replies: As a general comment, remember when you take on debt that if you miss a payment it can cost you significantly more as the furniture store will apply penalites and this will increase the total amount that you owe.
In terms of your specific question about whether to take out another loan to settle this account, Paul Slot, head of debt counselling company Octogen, says in some cases it is better to repay existing debt before incurring the cost of an additional loan.
Any new loan will occur administration fees.
Given the fact that you also missed payments, you may find it difficult to get a new loan.
Slot recommends that if possible, try to pay off the debt faster rather than taking out a further loan:
- Request a statement to determine the total debt due as well as fees and interest.
- Check that the additional R200 payment will enable you to repay in a reasonable period.
- If the answer is no you have two options — pay more or settle the debt.
On a R200 repayment your debt will be about R6 814,00 if repaid over 60 months. If you increase this to R250 per month you can repay the debt in 41 months and R350 will enable you to repay in 26 months. If you can afford R500 the debt will be repaid in 17 months.
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