I am a single mother of two. I owe almost R700,000 on my house. My car is paid off. I have platinum status at ABSA, although I earn 1/4 of what I earned 10 years ago, when I was put into this category by the bank.
On an overdraught facility of R60,000 and R30,000 respectively on my cheque and credit card accounts, I'm R50,000 and R3,000 in the red. I'm trying my level best to curb expenses and to try and get out of or at least minimise this debt, but just don't manage. My nett earnings are R18,000.
My salary covers medical aid and pension. Additionally, I pay towards an annuity plan, insurance and an insurance plan that will pay out R500,000 in 10 years time.
Should I sell my house to get out of the debt, and rather just rent a place? I doubt whether I'll get more than R1 million for my house.- Anon
The situation sounds complex and stressful, and I think that you would be wise to seek some assistance from a financial advisor to manage the detail. However, I can make the following observations:
1. Your credit card and overdraft debts are expensive
I.e. they have a high interest rate. It might be an idea to approach your bank and see whether or not you can consolidate your debt into your bond, which probably has a lower rate of interest. Your should exercise caution, though, because this should not be seen as a license to take longer to pay your credit card and overdraft off.
2. Examine your insurance carefully
Particularly in respect of the extent of your cover. Sometimes people find themselves considerably over-insured. But again, don't make the mistake of under-insuring either.
3. Re-examine your insurance
Re-examine the insurance plan that pays out R500 000 in 10 years. It could be that you would be better served by redirecting the payments that you make on that policy to service your debt instead. But the devil here will be in the detail, and you must ensure, through consultation with an advisor, that you won't be prejudiced by making such a decision.
4. Discipline yourself
If you find that your discipline in cutting your expenses is compromised by the size of and easy access to your overdraft, consider approaching your bank to reduce your overdraft limit, to eliminate that risk.
5. Consider your options
I'd caution you against selling your house without very, very careful advice and consideration. The housing market is not strong presently, and you might be making the critical mistake of selling low to resolve your debt crisis. Rather first consider how you can improve your monthly cash flow to eliminate your debt than sell your valuable asset to do the same.
Approach an independent financial advisor who is prepared to charge you a reasonable hourly rate to go through your situation and make some recommendations.- Darron West
Should Anon sell her house and rent instead? Share your advice with her in the box below.