The number of Kenyans taking loans from financial institutions shot to about 14.4 million in February this year occasioned by an improvement in financial literacy.
A good number have, however, found themselves listed with Credit Reference Bureaus (CRBs) because of improper debt management.
With increased mobile penetration in Kenya at 98 per cent, uptake of credit has spiked via mobile platforms. According to government records - about 4.3 million Kenyans, an 18.3 per cent representation have taken loans from a popular digital overdraft facility.
Roy Okonji, who describes himself as an award winning borrower, also a debt and money management coach, likens debt stress to a behavioral factor which majority of people fail to realise once they get hold of an approved credit facility.
According to Okonji, debt burden mostly occurs when one ends up having money in hands that was not planned for in which he says that a human mind only needs ten minutes to figure out what to do with money, no matter how much.
"Many people borrow blindly, and they end up having money in their hands that they had not planned for," Okonji told NTV's Wicked Edition.
According to Okonji, most borrowers fail to pay what they can - missing monthly payments makes it difficult to catch up. If you fail to pay for several months in a row, your account may go into default, which has serious consequences. A minimum payment will stop your debt from growing and will keep your account in good standing.
Another mistake is doing what your money can only do - The life coach argues that borrowers are never ambitious, and that they live within their means and do what their money can command them to.
An ADSA is a strategy majority are failing to excuse themselves from debt trap. (A) represents Acceptance- that you can never solve a problem whose existence you still deny - in this case "you are still borrowing to make a statement, and blaming others for the debt problems..
(D)- is Disclosure - that you cannot effectively come out of a debt whole if you don't take a moment to appreciate dept of the whole; it includes doing a list of everyone and everything you owe.
"The average person is not comfortable to do the list of everything they owe."
(SA)-Strategy - after making the list, starting to make the payment is the conundrum regardless of circumstance surrounding an individual. "Reach out to the lenders to let them know they have your interest at heart and negotiate debt repayment process at a point when you become unbale to pay."
"Look at your budget and shake it and ask yourself where you money is going. Monitor how you will be spending your money. through this, you will be able to prioritise to help manage your finances."
Many people go into projects and succeed and forget about surviving tactics post-borrowing. This Okonji says, makes one a perennial borrower, despite an original intention which was genuine.
Okonji holds that Kenyans on payroll fall into consumer debt trap for consumer household goods, which implies a failure to live within their means.
"Pay day is the most stressful days for most of people - these days are used to settle debt which is bigger than the salary, carry forward the obligation."
An economic analyst at one of Kenya's CRBs echoed Okonji's sentiment that "taking additional loan without restructuring the current loan one has, this will automatically lead to default risk."
As a recap, Okonji advises best way to escape debt trap. Pay extra on the loan with the highest interest rate each month until it has been paid off while making the minimum payment on the other loans.
Once the first debt is gone, Okonji advises, start paying extra on the loan with the next highest interest rate. Commit the same amount of money to loan repayment every month, even after you’ve reduced your number of loans.
