Debt management in Kenya can be difficult, especially if a person has numerous of them.
This may include mobile loans, Sacco loans, credit cards, and mortgages.
While debt may help us meet our financial commitments,
Mismanagement can cause stress, asset loss, and financial instability.
Learning how to efficiently manage debt might help you avoid frequent pitfalls.
and get financial freedom.
In this article, we’ll look at realistic debt management solutions and debt reduction methods.
Using biblical concepts to help you manage your money wisely.
What is debt management?
Debt management is the process of organizing and repaying debts in a way that minimizes stress.
It requires budgeting, prioritizing which debts to pay first,
and employing tools and strategies to manage repayments effectively.
Why is Debt Management Important in Kenya?
1.It lowers financial stress
Kenyans frequently deal with debt, including digital debts.
Proper debt management reduces the stress associated with many repayments.
2. Increases Credit Score
Kenya’s credit reference bureaus (CRBs) monitors your borrowing history.
Managing debt sensibly can improve your credit score.
Making it easier to obtain future loans with reduced interest rates.
3. Helps Achieve Financial Goals:
Proper debt management keeps debt from impeding financial objectives.
Examples include property ownership, education savings, and retirement planning.
Steps to Effective Debt Management
1. Understand your debts.
List all of your debts,
whether they come from mobile money platforms, traditional banks, or Saccos.
Keep track of the following information for each debt:
- total amount owed,
- interest rate,
- monthly payments.
- Due dates.
This provides a clear picture of your responsibilities and enables you to prioritize payments.
2. Prepare a budget.
Creating a budget allows you to plan your money for debt reduction.
while still meeting basic needs like food, housing, and utilities.
In Kenya, the cost of living varies.
A budget allows you to calculate how much you need and how much you can afford to repay.
3. Prioritize your debts.
Not every debt is equal.
Prioritize high-interest debts like credit cards and mobile loans.
There are two common ways for prioritizing debt payments.
i)The Debt Snowball Method;
Pay down the smaller debts first.
Then make minimum payments on higher bills.
This creates momentum and provides a sense of success.
ii)Use the Debt Avalanche Method.
Pay off the obligations with the highest interest rates first.
This saves money in the long run, but the results may take longer to show.
4. Negotiate better terms.
Don’t be afraid to approach your bank or loan provider and negotiate reduced interest rates,
especially if you have an excellent repayment track record.
Some banks or microfinance providers may be ready
to help you restructure your debt for easier repayment.
5. Consider debt consolidation.
If you have many loans, consider debt consolidation.
which consolidates all of your loans into one loan with a possibly reduced interest rate.
This option simplifies your payments and may result in lower overall interest paid.
However, make sure that the new loan terms are favorable.
6. Avoid taking new debt.
While managing your current debt, avoid taking out new loans
unless absolutely required.
This is especially relevant considering the ease of access to mobile loans.
which can add up rapidly.
Maintain financial discipline by staying within your means
7. Look for ways to enhance your revenue.
If your debt appears unmanageable, consider measures to boost your income.
You could consider side hustles such as selling things online.
Freelancing means providing services based on your talents.
Extra income can help you pay off your bills faster.
8.Consider a Debt Management Plan(DMP)
You can employ the services of credit counselling agencies to negotiate with your creditors on your behalf.
But remember to seek financial advice on DMP since it may not just suit you.
This is because it may take some time thus derailing your other financial goals.
How Can I Get Out of Debt in Kenya?
1. Set up a small emergency fund
It covers three to six months of living expenses.
This prevents you from accruing additional debt when unforeseen expenses happen,
such as medical problems.
2. Cut needless expenses:
Reduce unnecessary expenses.
In Kenya, this could mean cutting back on eating out,
avoiding impulse purchases, or minimizing your data and entertainment costs.
3. Pay more than the minimal amount owed whenever possible.
This minimizes overall interest and allows you to pay off your loan more quickly.
4. Utilize bonuses or windfalls Wisely
If you receive a bonus at work, consider utilizing funds from events like weddings or Harambees
to pay off your debt.
5. Seek Professional Help.
If you’re feeling overwhelmed, contact a financial expert or credit counselor.
Organizations like FSD Kenya provide financial assistance
and can help you establish a debt management strategy.
Biblical Principles for Debt Management
As a Christian, you can reference the Bible for advice on managing your finances and debt.
• Proverbs 22:7 (NIV)
The rich rule over the poor, and the borrower is servant to the lender.
This emphasizes the huge financial burden and the significance of avoiding unnecessary borrowing.
• Romans 13:8
Let no debt remain outstanding,
except the continuing debt to love one another.
for he who loves his fellow man has fulfilled the law”
The verse invites us to repay. We can repay our loans and live well.
• Proverbs 21:5.
the plans of the diligent lead to profit
as surely as haste leads to poverty
Careful planning and rigorous debt management can lead to long-term financial stability.
Common Mistakes to Avoid in Debt Management
i)Ignoring Debt
Pretending the debt does not exist exacerbates the situation.
Interest rates climb, making it more difficult to repay debts later.
ii) Paying only the minimum required can result in delayed debt repayment and higher interest rates.
iii) Taking out additional loans to repay existing debts
Using a loan to pay off another loan is dangerous and often leads to a debt spiral.
Concentrate on repaying what you already owe.
Conclusion:
Debt management requires gaining control of your finances
and making continuous, focused attempts to meet your obligations.
Whether you have mobile loans, credit card debt, or loans from Saccos and banks,
the measures indicated above can help you regain control.
Implementing these tactics can help you achieve debt-free life.
Reduce financial stress and attain your goals.
Trust in the path, stay disciplined, and trust that financial freedom is possible.
