BY HILLARY LISIMBA AMBANI
Hillary Lisimba Ambani is a prolific writer and prominent financial contributor at the 52 Weeks Challenge Group. In this post, he shares easy tips on the easy way to pay debts. This post on easy way to pay debts is as raw as he published it:
“Being in perennial debt without doing something about it is like walking through the rain from the CBD to Umoja hoping along the way it will subside and eventually die. You are not buying an umbrella, not getting into a matatu, nor hiding under some structure. Of course the ‘rain’ will subside after a while, and like that your name will be carved in the Hall of Fame at the infamous CRB, making you start dancing with those who are not eligible to access funding from financial institutions. Its not a good place to be. It is like a little prison. You know, even if you don’t exactly need the money, sometimes you just need the peace of knowing that if you wanted a loan of 1m today all you will do is fill a few forms, your bank account balloons and you start singing ‘some people wait for a lifetime, for a moment like this.’
So two words sum up this conversation when dealing with this rain that is debt; DO SOMETHING. And something is not borrowing more to repay this other side; neither is it slumping back in your mediocre bed to wait for the day you get listed at that bureau. Before you do something though, ask yourself one question; when did this rain start beating you? Find out what exactly pushed you into that debt, because you may need to treat that first before sorting out the debt. A female friend who was soliciting for cash to ‘pay and borrow again’ told me “Hilla nilikuwa napita pale Lifestyle nikaona handbag ingine hapo ilibidi tu niingie M-Shwari nikope 6k”. If you dissect that conversation you notice the problem there is not the debt, it is an impulse buy that will keep haunting her until she does something. Problem is if the impulse habit doesn’t die out she will be clearing, being debt free for a while then bumping into something else and the cycle will continue.
If you are in debt because it was a proper emergency then it is understandable, so lets work on treating that by looking at the easy way to pay debts:
1) My system, which I called the Inverted Pyramid, works wonders and is one of the easy way to pay debts. For the uninitiated, this system simply means if you owe 5k, give yourself 5 months to clear it. Pay the 5k, then instead of borrowing another 5k borrow 4, but prepare psychologically to live on a slender budget that month. Look through your expenditure and find out what it is you can cut out that will save that 1k. Hizo mitura unakula kila jioni hazikuwi extinct, you can avoid them for a while. Just ensure you don’t cut out on a necessity, usikose kulipa maji ukae miezi kadhaa huogi ati uko Inverted Pyramid, uanze kutembea hii mtaa ukinuka senge watu wakikukaribia wanashikwa na mafua.
2) Think about this; every loan advanced by Tala, Branch, M-Shwari, KCB Mpesa, Haraka etc comes with interest. Hapo najua kuna mtu nimesaidia ashaanza kudownload the next loan app akope. So basically for every 5k you get loaned you lose 500 or more of your own money. In short, every time you borrow 5k to replay that 5k ndio ukope tena you owe 5,500 and not 5k. So why not look through your friends and see who can advance you cash that doesn’t need interest then use that to sort these loans. If you have a good friend he/she would agree you pay in installments or at a later date. See that way you will save yourself the many 500s you are losing now at the same time repay your friend without getting stressed over deadlines and listing.
(Let me share a secret: Banks in the Middle East charge an interest rate of 1%, yes I am serious; ONE PERCENT. Kenyan banks charge either 11 or 14% not sure. So if you are lucky to have some connections to those areas you can take a loan there and clear the one you have here, then repay with 1% interest rather that 11%.)
3) Your piggy bank. Are you aware that if your piggy bank has 10k lying there but you owe M-Shwari 5k, Tala 3k and Branch 3k you have -1000 savings? I would respect you if you broke a piggy to use the money to clear all your debts even if it will mean not having anything to share with us when the year ends. You are better off having zero cash on you, but with zero debt, than a piggy collapsing under the weight of coins chini ya bed while your phone collapses the other side from debt reminders.
4) Unexpected cash. Everyone will attest that there are times we bump into unexpected cash (company bonus, a debt you had written off being paid, getting a lift to your village when you had 1k budgeted for the same etc. Most of us tend to forget ourselves when such cash comes in. Unatumiwa tu bonus hivi umeanzia Luthuli kutafuta kuku porno (why did they give it such a naughty name aki. Like how am I supposed to introduce that name to my 3 year old now next time he points to ask “Daddy, hiyo ni nini?” Ukishashiba wewe huyo kiguu na njia hadi Ngara, unainama at every place; bra hapa, thong pale, mothers union hapo kwingine, then come home with a whole gunia of clothes hadi kwako kunanuka tu Ngara. 2 days later you have a reminder from Tala. Am I making sense?
5) Separate funding. Most of us pay our debts from salaries/wages, which shouldn’t be the case. The best idea should be clearing it from cash that is not out of our everyday requirements . . . and that’s where side hustles come in. Broker something, even if you make 1k as your fee that is still some headway towards reducing your debt, meaning if you broker 5 deals and you owe Tala 5k you realise you are debt free without getting into your monthly pay? Good thing is that side hustles don’t have to wait to end month like your salary, meaning you can clear the loans earlier, and some loaners charge less interest if the money is paid earlier. So it’s a win-win.
6) Avoid long-term loans. Take a pen and paper, visit your banker and ask for calculations into this. Ask how much it will be in total to have a 1 million loan repaid in 1 year, 2 years up to 10 years. Paying in a shorter period may be heavy but you not only pay less but also get over the loan as soon as possible. That is actually the reason many people with heavy mortgages tend to default after paying almost 70%. Another risk you avert is the changing tides in interest rates and the exchange rate. If you ask me, I would rather struggle for a year but know that I will be peaceful the following one, than be indebted to a bank for a whole 5 years.
7) Temptations. Have you cleared your loan with any financial institution? Notice once you clear they come back with 2 sentences; 1) they congratulate you for clearing your loan yadayada, to make you fill you are the maehn. Ndio uanze kutembea umeweka kifua mbele hii Nairobi ni kama unaenda wrestling. 2nd sentence is usually that you are invited TO BORROW AGAIN! That second sentence is usually the devil dancing Azonto with your name. Anataka ukope tena ndio you go back to where you’ve probably struggled a lot kuhama. Banks will call you to just talk, share new products and the like, so much that if you are not strong you will be back to ground zero . . . and that is how you see people saying ‘nimepewa loan na sijui nianze biashara gani.’