Debt consolidation loans combine your existing debts to make a single monthly repayment. Compare consolidation loans with low rates to save money.
What is Debt Consolidation?
Debt Consolidation in South Africa remains to be one of the most effective debt management tools for South Africans. The program puts you in control and gives you the ability to address your debt payment a lot easier. In the process, it also allows you to manage your finances better so you can reach your financial goals in life.
Types of Debt Consolidation
Most debt consolidation loans are provided as a secured loan. This means that the loan is backed by an asset you own, such as your house or vehicle. If you fail to meet the repayments, it means the lender is able to sell the secured asset to help recoup the money they are owed. The reason that lenders are able to provide lower rates of interest is because there is less risk to them when the loan is secured but obviously higher risk to yourself and your assets.
Although most debt consolidation loans are only provided on a secured basis, e.g. to property owners. It is possible to get an unsecured debt consolidation loan whereby you can still save you money on your existing debts, and you don’t need to own a home to get one. Instead, the lender will use details on your credit report to establish your eligibility. Therefore this is clearly a high risk debt consolidation loan for the lender so the interest rates will not be as good as the secured loans.
How does Debt Consolidation Work?
- First, you will be asked to complete a debt assessment profile, this can usually be done online and is used to and provide details of your financial situation.
- The Debt Consolidation company will then develop a plan to determine whether your monthly expenses and debt exceed your monthly income.
- You will then be placed under “Debt Review” which will mean you are protected from your creditors. The consolidation company will inform all of your credit providers and the credit bureaus that you are now under “Debt Review”.
- The consolidation company will then restructure your payment plan and negotiate with your credit providers to ensure that going forward you pay a single payment that you can afford.
- Once the plan has been finalised, the repayment plan becomes a court order. Attorneys will apply at the courts to make the restructured payment plan a court order.
When you’re under Debt Consolidation you will be protected against any legal action taken by your Credit Providers and will only have to pay one monthly, affordable payment, whilst leaving you with enough money to cover your monthly expenses.
Best Debt Consolidation Loans in South Africa
|Loan Company||Benefits and Services||Amount Range||Repayment Period||Links|
|FNB debt consolidation enables you to combine your qualifying debt from various credit providers into one convenient Personal Loan.||R1,000 - 300,000||1 to 60 Months||Learn more|
|Old Mutual Consolidation Loans|
Old Mutual debt consolidation loans simplify things by lumping your debt into a single loan. Don’t risk another late payment charge. Ensure greater peace of mind by consolidating your debt.
|R200,000||60 to 84 Months||Learn more|
|African Bank Consolidation Loan|
Lower your monthly installments & pay less fees by consolidating debt of up to 5 loans into one consolidated loan.
|Up to R250,000||18-72 months||Learn more|
|ABSA Consolidation Loans|
A basic, cost-effective account that helps you manage your finance better. If your debt is beginning to take control of your life, they have the ability to provide advice on how to effectively manage your debt and take back control of your finances.
|Up to R350,000||1 - 84 Months||Learn more|
|Standard Bank Consolidation Loans||Instead of making multiple monthly repayments on various accounts – all with different interest rates – you can combine your debts into a single manageable account. By consolidating your debt, one interest rate is payable, giving you lower monthly repayments.||R300,000||Up to 72||Learn more|
Capitec Bank makes debt repayment easier. It reduce your total monthly repayment, and maintain and protect your good credit profile.
|R5,000 - 250,000||12 to 84 Months||Learn more|
|Metropolitan Consolidation Loans||R250,000||Learn more|
|Blue Oak Systems||Blue Oak Systems offer an online debt consolidation system called "RESET". The system is designed to restructure your debt, free up cash flow and save you money. RESET is endorsed by SA’s top lenders and delivers you answers in minutes.||n/a||n/a||Learn more|
DebtBusters is one of South Africa's biggest debt management companies. Aim to give clients hope for a future of financial wellbeing and the ability to borrow credit again.
Pay only what you can afford, with just one single monthly payment.
Who Uses Debt Consolidation?
Debt consolidation loans are used by people who have a number of active accounts in debt. They may be trying to manage these payments on a monthly basis but not having much success. People’s outstanding debts can easily add up with things like credit card debt, medical bills, student loans, personal loans and home loans. If you find yourself in a similar position, it is can be a good idea to consider using debt consolidation to manage multiple payments.
What are the benefits of debt consolidation?
From the name itself, this debt management program aims to combine most, if not all your debt payments under one account. Once you take advantage of debt consolidation, you get to enjoy several financial benefits it brings. Here are some of them worth mentioning.
Combine Your Payments
It might have been a struggle to try and keep in mind of several payment details every month. If you have four different credit cards all with balances from different lenders, it can be a struggle every month. You are trying to stay on top of four different due dates, payment amount, and most especially, different interest rates.
Debt consolidation can help you combine all these debt payments into one single loan repayment and makes it easier to monitor the account. You will only have to keep in mind one amount to pay every month, one date to pay your lender, and one interest rate to monitor. This limits the chance of overlooking a payment and being hit with late payment fees and other finance charges.
Lower Payment Amount
When you enrol in a consolidation program, you can do more than stay on top of your monthly payments. Consolidation debts could potentially lower down your monthly payments. One of the factors that can help you with a lower payment is an improvement in your credit score. The higher your score is, you can enjoy lower the interest rates. With this, it follows that the lower the interest rate is, the lower the payment could be.
One other way to lower down monthly payments is stretching the payment period over a long period of time. This gives you the chance to free up some funds in your monthly budget and allow you to either put away for savings or make extra payments on other debt accounts. The downside of this is that you could end up paying more on interest in the end.
Helps Protect Your Credit Score
Debt consolidation can be a great way to protect your credit score as well. It is important to understand that your score plays a pretty big role in how you are perceived by lenders. The lower your score, you will either be given a high-interest rate or be simply declined for loan applications. On the other hand, a higher score gives you the opportunity to enjoy lower rates.
One of the reasons for this is that lenders see you as a risky investment when you present a low score This means that you are not financially responsible and might forfeit in your payment. South Africans with high credit score portray a financially conscious person who will see the payment through until the end.
Debt consolidation in South Africa can be your best bet in getting you out of your financial woes and provide a path to debt freedom.
How do I Apply for a Debt Consolidation Loan?
Debt consolidation lenders in South Africa usually require the following documents:
- Proof of identity
- Most recent payslips
- Three months’ worth of bank statements showing details of your monthly salary deposit
- Proof of residence
There may be other documents your lender will require once you proceed with your loan request.