How to Pay off Debt with No Money

Paying off with no money can seem like an insurmountable task. You need money to pay off debt, but with South Africa’s newly announced 33.5% unemployment rate for the second quarter of 2024, paying off debt can seem like climbing Everest. Job loss, disability, or crisis can make paying off debt veritably tough.

Luckily, we’ve put together a handy guide for paying off debt with no money. We’ll discuss a debt help system and your last options if you truly have no source of income, as well as the consequences this could pose on your life and how to mitigate them.

If you have a small source of income, you can use a debt help system called debt review. Moreover, if you have no money and are on the verge of homelessness, you should know your rights surrounding debt collection and how you can protect yourself. All this and more in the coming paragraphs.

Paying off debt with as little money as possible

Firstly, know that overwhelming debt isn’t the end of the world. You will make it through this, and you have options. Yes, some of them will affect your credit score long-term, but who gives a toss about your credit score when you’re under threat of legal action or might lose your assets? Don’t forget that credit scores are built long-term, and there are always ways to rebuild your score, be it through credit clearance or applying for credit after debt review with a secured credit card.

Make sure you don’t slip further into debt and optimise your budget insofar as you can with the 50-3-20 rule– cut luxuries like eating out and new clothing, buy bulk, and consider getting another job. Don’t take out more debt and fall further into the debt trap.

Your rights concerning debt collection

Don’t worry about going to jail because of debt. You’ll only go to jail if you don’t go to court when you’ve been summoned for contempt of court or if the debts are taxes or child support. You can also go to jail for not complying with legal orders pertaining to debt, according to the National Credit Act.

The worst that can happen to you regarding debt collections is a garnishee order being issued against you whereby your repayments are deducted from your salary and your assets repossessed and auctioned. The court can only do this if auctioning your assets will pay at least 20% of the debt.

What to do if you have no income

If you have alternative sources of income, like payments from a rental property or a pension, you should consider debt counselling. Debt counselling, or debt review, is a legal process that uses a debt counsellor to restructure your debt by negotiating with creditors for reduced debt repayments and interest rates. They can also negotiate longer repayment terms to reduce your monthly repayments and protect you from legal action– provided no action has been taken before your debt review application. As soon as your creditors have been notified that you’ve applied for debt review, they’re not allowed to file to have a judgment filed against you.

If you don’t have any source of income or are unemployed, you can try to negotiate with creditors yourself to attain an extended repayment plan or reduced payments. Most creditors will agree to this to ensure you don’t default entirely and they can recover at least some of their money. Alternatively, you can file for a payment holiday. Lastly, if you’re seriously in a pinch, file for bankruptcy. This can also protect you from legal action but will have long-lasting effects on your ability to be granted credit.

If you have UIF, a pension, or are married in a community of property, these alternative income sources can be considered. You and your partner must apply for debt review together, and their source of income will be taken into account. Life under debt review protects you from judgments and garnishee orders and helps you get out of debt.

Stop struggling financially; let Debtco Group help you with debt counselling. We’re experts in our field with years of experience helping clients live debt-free. Contact us for protection and reduced debt repayments today. You could be debt-free in 3-5 years.