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Different Types Of Debt

Different types of debt come with different repayment timelines.

This is often called a repayment “term”. Basically, that means how long you have to repay the debt according to the agreements you have in place with your credit providers.

Many South Africans juggle multiple accounts at once, from short term loans to long term home finance. When money is tight, it is easy to move between these types of credit just to get through the month. 

This can actually hide how deep in debt you are and how bad your situation is. If you are using one form of credit to pay towards another, this is a big warning sign.

Understanding how long each one typically runs can help you make better choices. Here’s how the timelines compare.

    • Payday loans: Usually repaid within 1 month (when your salary comes in), but once you start this process it is hard to stop as you run out of money again and again each month.
    • Overdrafts: These have no fixed term and can continue month to month and grow over time. Normally, consumers realise there is a problem when they start to get closer and closer to the limit of credit.
    • Credit Cards: Similar to overdrafts, most people keep reusing their credit card limit over and over. This can mask the fees that are being added. Credit Cards are typically one of the most expensive forms of credit.
    • Short term loans: Typically 3 to 6 months, often with high fees and interest.
    • Personal loans: Typically structured over 5 years these days (but can even go up to 7 years), depending on the amount borrowed. These days, the amounts you can borrow have grown a lot. Some of these are even known as Mega Loans.
    • Vehicle finance: Commonly between 5 and 7 years. Many car loans now feature massive last payments (called “Balloon Payments’).
    • Home loans (bonds): Usually 20 to 30 years, with total repayment often adding up to two to three times the original amount you loan.
    • Court judgments: If you missed some payments and a credit provider went to court and got a judgment against you, then creditors may have up to 30 years to collect outstanding debt.

With those typical repayment periods in mind, it is interesting to think about how long most people take to get out of debt when they enter debt review. Typically, most consumers receive a plan to repay their debt over about 60 months (around 5 years), depending on their situation. In many cases, as consumers are able to improve their situation they are able to leave debt review early.

Compared to long term debt like bonds or even court judgments, debt review offers a far more structured and often shorter path to becoming debt free.