Many more people than we think labour under the weight of debt. Being in debt can cost you your life or at the least, totally mess it up. It not only affects your finances (as most debts carry costs), credibility, self-esteem and peace of mind, many have been assassinated or committed suicide because of bad debts. If not well handled, debt pressures will lead to more debt, desperation, destitution, and may damage your public image and relationships. For clarity, properly structured credit obtained for investment purposes (such as  study, reasonable business premises or home mortgage, affordable business or personal car loans) being serviced from steady and dependable income do not fall in the category of toxic debts under discussion.

Debt may arise from credit obtained for “important” purposes like rent and children’s education to those raised for “frivolous” reasons like “aso-ebi” (family uniform); lifestyle induced expensive credit card debt and other attempts to “Keep up with the Joneses”. Default, compound interest and penalties will further damage your finances and eventually you may feel like you’re sinking deeper and deeper into a bottomless pit or are drowning in a sea of debt.  Whatever the path you took into your current debt situation, one thing is clear – you need a plan to dig yourself out of that hole or else you will, unfortunately, sink lower still or eventually go completely under.

Let’s discuss 7 steps to get you out of debt:-

1. Stop – If you find yourself at the bottom of a hole dug by yourself, you will keep sinking deeper unless you stop digging. So you must determine to STOP borrowing or creating new debts. You will have to start living squarely within your means. In addition, you should budget to spend significantly less than you earn so you can free up some funds towards your plan to get out of debt.

2. List – You should start by drawing up a list of every debt you owe indicating who it is owed to, the amount owed, interest rate, if any, purpose for which the credit was drawn and due date. This analysis will give you a full picture of the situation and guide your subsequent steps. Looking at the purpose will help you decide whether or not it was worth the trouble, and to decide what not to repeat in future. The rate of interest and due date will help determine which debts to pay first.

3. Prioritize –You must then re-arrange the listed debts in order of priority of repayment. At the top of that list will be the most expensive debts, those already overdue for payment or with Creditors threatening action. At the bottom of the list will be friendly loans with no interest obligation, indefinite repayment dates and low likelihood of causing you any embarrassment or damaged relationship. Nonetheless, the objective is to pay them ALL off.

4. Source – You will then need to examine your sources of income from which the debts are to be paid. If you took Step 1 above, you will know from your budget how much you will have left from your expected income within a reasonable time (e.g 12 – 18 months) to commit towards debt repayment.

5. Schedule – Armed with the information in 5 above, begin to schedule how to repay your debts with the intention of eliminating from the top of the list to the bottom. Scheduling will include calling individual Creditors to discuss and get their consent to your proposed repayment schedule to repay them.

6. Extend – You may also need to seek deferral or extension for some of the Debts where you will need a longer period than initially agreed or contemplated for repayment. You will need to demonstrate transparency and commitment to repay. You may need to make this call with your Adviser, Spouse or other credible person e.g your Pastor who can attest to your sincerity and commitment to paying off the debt as proposed.

7. Perform – It is of utmost importance that you perform by keeping to your commitment and meeting all obligations as they fall due. You must adhere faithfully to your schedule until all debts are cleared. It is not inconceivable that unforeseen events may occur necessitating delayed payment or additional rescheduling. Your duty is to notify the affected Creditor IMMEDIATELY you become aware of this possibility and to propose a realistic alternative.

In conclusion, borrowing and credit purchases are a part of modern living. However, excessive or poorly serviced debt can become a huge embarrassment leading to loss of reputation, loss of homes, jobs, broken relationships and even suicide or assassination in extreme cases. The best advice is to limit the use of credit to rational and affordable investment decisions which are then properly serviced. If however you are already in debt, the next best advice is to take the above steps to get out of debt as soon as possible. It is not going to be easy and you may need encouragement and mentoring through the process, but it can be done and you will feel truly free when it’s finally over.

I wish you every success.

Oluwatoyin Sanni is the Group CEO of United Capital Plc, a leading African investment banking and financial services group providing financing and investment solutions to African governments, companies, and individuals.  She is also the Pastor in charge of  LifeGate Area 30, Lagos Province 23 of the Redeemed Christian Church of God.