My name is Peris. I earn a net salary of Sh68,000 but I am really in a lot of debt, some of which are in default. I have mobile loans too from about 10 apps. I schooled my siblings in high school and college and all are now done. Two will be graduating this year. I recently got married and have one kid. My husband pays the rent while I take care of the bills; water and electricity Sh2,000, shopping and food Sh10,000, housegirl Sh5,000, Postbank Sh5,000, Britam Sh3,000, Saccos Sh6,000, travel and other expenses Sh8,000, home and parents Sh15,000. I need help because nothing seems to be working. I have mobile loans totalling Sh55,000 which are active. I borrow from one app to pay the other which keeps on increasing the apps to borrow from because of high interest rates. I defaulted on two; one with Sh19,000 but penalties accrued pushed it to 42,000 and another one Sh9,000 which has now reached Sh17,000. These have put me on CRB. Britam loan has also added up to Sh45,000 yet I borrowed Sh25,000 and paid Sh5,000 only. I also have an active bank loan of Sh13, 495 repayments every month.
Alex Kibebe is the founder of Rubiani Wealth Management Ltd and an investment consultant and business development coach
List your loans from the most expensive (Highest interest rate) to the least. From what you have shared, your debts are; Mobile loans Sh55,000, Defaulted loans Sh59,000, Britam Loan Sh45,000, and Bank (Repayment of Sh13,495).
You then need to review your budget so as to set aside as much funds as you can to pay off your loans. Your expenses listed total Sh54,000. You also mentioned that your bank loan repayment is Sh13,495 thus your total monthly expense is Sh67,495. This leaves you with about Sh500 at the end of the month. You, therefore, have to borrow new loans to pay old loans. This means that you are living above your means. You need to make adjustments. Some suggestions you can consider include:
•Reduce the support that you are giving to your parents and home from Sh15,000 to Sh5,000.
•If your contribution to Postbank and to the SACCOs is for investing and not for loan repayment, I would advise you to pause these contributions and first focus on settling your debts. Once you are done with your loan repayments, you will get back to saving and investing.
•Consider reducing the amount you spend on shopping – say to Sh8,000 and other expenses from Sh8,000 to Sh5,000. Getting out of debt will require some sacrifices.
•Ask your husband to help you by taking on more expenses in the house.
•Look for some extra income from a part-time job or start a side business.
Work at raising at least Sh20,000 every month to go towards debt repayment. Start paying off your loans from the most expensive to the least. If you do so, you can settle your loans (with exception of bank loans) within nine months.
Another option you can consider is to take a loan from your SACCO and pay off all your loans. A SACCO loan will most probably be cheaper than the other loans thus reducing your loan repayment. It is also less stressful to pay off one loan as opposed to dealing with multiple loan providers. You can then use up the funds that you have saved up from your adjustments to repay your loan.
Once you have settled your loans, ensure that you do not go back into the debt cycle again. Keep your expenses below your income. If you see that you are struggling to keep off from debt, I would advise you to get help from a debt counsellor or get accountability from your partner.
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