January Repo Rate Cut Boosts Household Spending Potential

The recent 25 basis point cut has given way to an opportunity for debtors to pay less on their debt, mitigating the large personal loan and mortgage interest rates of today. The prime lending rate dropped to 11%. This cut could not have come at a better time for South Africans, as for many, the first quarter is the most expensive time of the year.

The small cut in interest rates offers some breathing room, making repayments more affordable and essential expenses more manageable. Every little bit helps when you’re stuck with a lot of debt and navigating a tough economy.

South Africans must use this time to manage their debt repayments strategically. This interest rate cut is promising and could be a saving grace for many. For example, a bond with a principal of R1,000,000 could see savings of up to R200 in savings per month.

This post discusses how South Africans use this interest rate cut to their advantage, and what to do if they’re over-indebted.

Let’s dive in!

How to Use the Interest Rate Cut to Your Advantage

You can use the interest rate to boost your emergency fund, make larger repayments, and pay off high-interest debts first.

Pay Off High Interest Rate Debts First

The interest rate cut makes paying off high-interest debts first easier, helping you save on your overall debt amount in the long run. When you pay off high-interest debts first, you’ll minimise the debts that accrue more interest quickly, reduce the overall time it will take to become debt-free, improve your credit utilisation ratio (the amount of debt you have compared to your limit), and alleviate financial stress, creating a sense of accomplishment.

Make Larger Repayments

You could use the money you save from the reduced interest rates to make larger repayments. This way, you’ll reduce your principal balance faster, which will reduce the amount of interest you pay and save you a significant amount of money in the long run.

Moreover, paying off debts faster will relieve financial stress and reduce the anxiety you have around debt. Once you’ve paid off your debt, you’ll have more money for the things that matter, such as saving for retirement, building an emergency fund, or pursuing assets.

Build an Emergency Fund

Building an emergency fund will protect your finances in the long run. If you have an unexpected expense, you won’t have to take out a loan to meet your monetary obligations. This way, you’ll save money in the long run.

An emergency can also help you avoid dipping into your long-term savings, helping you meet other financial goals without a hassle. Don’t fall victim to financial regret.

What to Do If You Have Too Much Debt

If you can’t afford to make repayments or living expenses because of repayments, you are probably over-indebted. Luckily, there’s a way out: it reduces repayments, cuts interest rates, and offers legal protection – debt review.

Debt review is a legal process administrated by a debt counsellor. They negotiate for lower interest rates and reduced repayments with creditors on your behalf to mitigate indebtedness. This way, your repayments are affordable and you’re able to become debt-free within five years.

As one of the best debt review companies in Cape Town, Debtco Group has helped thousands of South Africans become debt-free. Our debt counselling experts have years of experience negotiating reduced repayments, cutting interest rates, and protecting consumers from legal action. Experience financial freedom – contact us today.