Getting out of debt you already have

First, write all of it down

One sheet, one line per debt: who it is owed to, the total still outstanding, the installment, the date it falls due, the interest rate, and whether anything is pledged against it. Include everything — the microfinance loan, the phone loan, the shopkeeper, the money from your brother.

Almost nobody has done this before the day they have to, and the total is usually a surprise. It is also the only number from which a plan can be made, and seeing it is the hardest and most useful ten minutes of the whole process.

Stop the bleeding before you plan

No new borrowing while you are working this out — and in particular, no new loan to pay an old one. Rolling a phone loan into another phone loan adds a full fee to a principal that has not moved, and it is the single fastest way for a manageable problem to become an unmanageable one.

If a lending app is still able to disburse to you with one tap, that is a door worth closing for a few months. The friction is the point.

Pick an order and keep to it

There are two sensible orders. Pay the most expensive debt first — the one whose interest or fee is highest — and you will pay the least in total. Pay the smallest debt first and you will clear a whole line off the sheet sooner, which for most people is what keeps the plan alive.

Either is better than paying a little to everybody, which is what most people do and which keeps every debt alive at once. Whichever you choose, keep paying the minimum on the others so that nothing falls into recovery while you concentrate.

Talk to the lenders first

Go to each institution before the date you will miss, with your sheet and a specific proposal. Ask for a longer term with smaller installments, or a pause of a month, or interest-only for a period. Institutions restructure regularly; it is ordinary work for them and far cheaper than recovery.

Being open about the other debts helps rather than hurts, because a restructure built on half the picture fails in a month and then nobody trusts the next proposal.

Consolidation: when it helps and when it does not

One larger loan that clears several small expensive ones can genuinely help: a single date, a single installment, usually a lower rate than phone loans carry. It helps only if it clears the old debts completely and the door to re-borrowing stays shut.

It hurts when the old debts are only partly paid off, or when the new loan is longer and larger and the small ones start refilling. Then you have consolidated nothing and added one more installment.

Selling the asset yourself

If a pledged asset will have to go, selling it yourself almost always raises more than an auction, and you control the timing. Tell the lender what you intend, agree in writing that the proceeds settle the debt, and get the clearance letter when it does.

It is a hard decision and often the right one. A business that survives without one machine is still a business; a business carrying a debt it cannot service is on its way to losing the machine anyway, and the building with it.

When it is over

Collect every clearance letter and every pledged document. Then put one installment's worth aside each month into something slightly awkward to reach. The households that come back to this page a second time are almost always the ones that cleared the debt and kept nothing in reserve.

Sources

• Financial consumer protection — Bank of Tanzania
• Guidelines for Handling Financial Consumer Complaints, 2025 — Bank of Tanzania