Debt: Your DIY repayment plan

Kristia van HeerdenDebt, Latest

Download this series as a free eBook here.

Your debts may have taken on a life of their own during the COVID-19 crisis. In this article we are going to give you the tools to put together a clearly-formulated debt repayment plan to pay off all your debts in a year. We’ll illustrate how renegotiating your monthly instalments can help you get rid of your debt and provide an easy-to-follow script to help you renegotiate debt repayments. You’ll also find a free, downloadable spreadsheet that you can customise to work out your ideal debt repayment plan.

The silver lining

Being handed over could actually make it easier to repay your debts. Remember, unlike debt counselling or consolidation, debt collection agencies are only concerned with collecting the money on the account that’s been handed over.

You have more room to renegotiate your debt repayments than you might think, especially once you get handed over. It’s better for a company to get back all the money and interest over a longer period than getting no money at all because you defaulted on your account. Most of us never learn how to ask for discounts or extended repayment periods, but you can get as much as 20% off the outstanding amount if you engage with the debt collection agency. We’ll show you how and why this matters later in the article. 

DIY debt repayment plan

Below we are going to show how renegotiating your minimum payments gets you to your end goal quicker than skipping payments altogether. This debt repayment plan works with the salary you’re currently earning, but only if you don’t take on any more debt. 

If you are reliant on short-term debt like a credit card to get through the month, exclude that account from this calculation. Once all your other debts have been paid off, you’ll have more disposable income to pay off that account and make it through the month on your own steam.

Step one: See the full picture

You need to start with a clear picture of the money you owe. This first task is the most unpleasant, but it’s impossible to defeat the monster unless you know what you’re fighting. By the time you get to the final step of this repayment plan, you will feel much better – we promise!

Make a list of all your outstanding debts and write down the minimum amount you need to repay every month. Also write down how many more months of outstanding payments you have. Don’t add them all together just yet. Take one unpleasant bite at a time. 

Step two: Determine flexibility

Some creditors are more flexible than others. That’s especially true at the moment. Many banks introduced payment holidays to help desperate South Africans navigate this crisis. You can also negotiate repayment terms with smaller institutions like your doctor’s practice or your child’s school. Accounts that have been handed over to debt collection agencies can be flexible, if you remember to ask. Think of the debt collector as a mediator.

Rate your debt by flexibility on a scale from one to three. Debts with no room for negotiation, like micro loans, would get a rating of one. Debts that you might pay off later or in smaller instalments, like an outstanding amount at the pharmacy, gets a rating of three.

Step three: Write down what you can afford

If you’re feeling overwhelmed by your debt, it’s probably because your monthly repayments are higher than you can afford to repay in a month. 

  • Write down how much money you can realistically pay towards your debts every month.
  • Add up your minimum repayments. 
  • Deduct what you can afford from your minimum repayments due. 
  • The answer is your goal in step four. 

Step four: Negotiate

Your entry-level goal in this step is to reduce your monthly repayments to get to the amount you can actually afford to repay, as identified in step three. Your stretch goal is to reduce it even more so you can contribute whatever is extra towards repaying high interest rate accounts.

Remember your flexibility list? It’s time to contact all the three’s. Use the script at the end of this post to get the conversation going to reduce your minimum monthly repayments. In the case of your child’s school or your doctor’s office, you might get an even lower rate by having the conversation face-to-face. If your minimum repayment amount is for a period less than a year, you might reduce the monthly rate by extending your repayment period to a year.

Once you’ve done all the three’s, target the twos. By the time you’re done with those, you should have the confidence for the ones. 

The reduced monthly payments have to be agreed upon by both parties. If you reduce your monthly payments without speaking to the company you owe money to, you’ll be handed over.

Top tip: If you are negotiating with a debt collection agency, ask them if they can offer a discount on your debt if you agree to pay it off over a year. 

Case study

This spreadsheet by VeriCred offers three possible debt repayment scenarios. Scenario number three follows our debt repayment plan. The red cells indicate skipped payments. 

Palesa earns R15,000 a month. She has set aside R4,500 per month to repay her debts. Before her negotiations, her monthly repayments amount to R5,079. 

In Scenario 3, she adds the money she saves by reducing her minimum payments to the least flexible and highest interest-rate accounts. Once an account is paid off, she adds the money that would have gone to that account to the next account. 

If she follows this strategy for a year without taking on any new debt, she can repay all her debts within 12 months. Every additional cent she puts towards repaying her debts will make the time she spends repaying debt even shorter.

It can easily feel like we’re stretched too thin already, but enduring some discomfort for a few months by cutting down on things that don’t keep us alive will speed up the debt repayment process significantly. 

For example, Palesa tends to include treats like hot chocolate and Doritos in her weekly shopping. If she decided to forego those items, she would save around R60 per week, or R240 per month. Adding those savings to her debt repayment plan will help her get out of debt faster so she can go back to indulging in her favourite treats.

The negotiation script

Use the script below to help you start a conversation about your minimum repayments. Replace all the Xs in the below examples with your personal details. Practice it a few times before making the call.

You: Hi, my name is (say your name and surname). My account number is X. My minimum monthly repayment amount is RX. I’m struggling to meet my financial obligations at the moment. Would it be possible to reduce my monthly minimum payment to RX?

In the best case scenario, the friendly operator on the other end would just agree. If they don’t, try the following:

You: Thanks for your help. Would it be possible to speak to a manager about this?

Once you have the manager’s ear, repeat the first script. If you’re still not lucky, try saying:

You: I’m afraid I won’t be able to afford the current minimum payment. Would it help if we increased the repayment period? Is there someone else I can speak to about reducing my minimum payment?

Remember, smaller repayments every month serve you better than making larger repayments when you’re skipping months. Making these calls can help you keep a healthy credit record, reduce the amount of financial pressure you experience and enable you to de debt-free by this time next year.

Good luck!

NEXT ==>> Why debt costs money


This series will help you gain control of debts that have spiralled out of control. We will explain what it means to be handed over for collection and how that differs from debt review, debt consolidation and insolvency. We will help you understand your rights as a consumer and offer some debt management strategies. This series is possible with the help of VeriCred, our partners in debt education.