Taking out a loan and paying it back can often be a stressful ordeal. Now, imagine having multiple loans that you need to pay back. This can easily become overwhelming for just about anyone. Fortunately, Capitec bank provides consolidation loans which offer individuals assistance in dealing with this.
Capitec consolidation loans – what are they?
In case you didn’t know, a consolidated loan is taken out to pay off other loans.
Let’s use Peter as an example. Peter took out a few store loans, a payday loan, a personal loan, and a credit card. He now has to pay monthly installments on all of these loans. As a result, he has to budget for three separate loan repayments.
Peter then makes a decision that he wants to settle all of these loans. However, he doesn’t have the money available to do so. He then contacts Capitec and takes a debt consolidation loan. This consolidation loan allows him to pay off all of his loans simultaneously.
Now, all that Peter has to do is pay back one single loan – his Capitec consolidation loan. In essence, this makes his life a lot simpler and he only has to budget for one monthly repayment and loan term.
What are the benefits of Capitec consolidation loans?
Now that we know what a consolidation loan is, let’s look at some of the benefits. Firstly, consolidation loans are a great option for those in debt counseling. Secondly, Capitec Consolidation loans help individuals save money in the long term.
Here are some other perks to getting a consolation loan:
Improves your credit score
There might be some months where money might be tight. As a result, you miss your monthly loan repayments. This will have a negative impact and can drastically affect your credit score. However, you can consolidate all of your debts into one lower monthly payment. This will make it easier to keep your accounts in good standing each month. Therefore, this will improve your credit score.
Save on interest
If you have multiple loans you will have to pay interest on each of these loans. However, combining these loans into one will allow you to pay one fixed interest rate. This will save you the trouble of paying for more than one interest rate.
Pay lower monthly installments
Each loan comes with its own installment amount. This can affect your monthly finances and living expenses. However, with Capitec consolidation loans individuals will only have one creditor to repay. Consequently, the monthly installment amount will be much less than with multiple loans.
Settle all debts
If you choose to take out a consolidation loan you can quickly settle all your loans. This allows individuals to just have one loan instead of many other loans. Furthermore, you will only have to deal with one financial institute, instead of several others.
What are the disadvantages to consolidation loans?
Now that we know some of the perks, let’s take a look at some of the disadvantages.
High interest rates
Unfortunately, interest rates are a lot higher when taking out a consolidation loan. The reason is, most people who take out consolidation loans do not have the best credit scores. A higher interest rate results in a higher repayment. In essence, most of the monthly installments are used to pay off the interest.
Certain financial institutions will require additional fees. These upfront fees might not be affordable to someone who is already in a tight financial spot.
Costs more money
In the above section, we discussed paying lower installments. However, in the long run, the amount of money paid will be a lot more. While consolidation loans give some room for repayments, they can also restrict people.
Long term expense
Consolidation loans are taken out for a certain term. Most have a long-term repayment plan. This can often result in a dreadfully long financial burden.
How Consolidation loans work
There are two ways to obtain a consolidation loan. The first method is similar to a regular loan application. Clients will need to meet certain criteria and undergo credit checks. Once it is determined that they will be able to make monthly payments, they will be approved. The money will then be transferred to the clients’ bank account. Thereafter, the client will settle their debts.
The second method is when financial institutes provide clients with a settlement letter. With this method, the institution will settle the debts directly with the creditor.
Who is the ideal candidate for a Capitec consolidation loan?
The ideal candidate would be someone who struggles to pay off their accounts. This could be because of financial restrictions or lack of income. Moreover, if you have multiple loans and can’t afford repayment then a consolidation loan is ideal for you.
Furthermore, consolidation loans allow individuals to pay one loan instead of a number of loans. Not only does this save money but it also allows some leeway financially.
If you would like to apply for a Capitec consolidation loan, visit www.capitec.co.za
How to apply for Capitec consolidation loans?
You can apply by either visiting a Capitec branch, completing the online loan application form, or via SMS sending your ID number to 30605.
What you need to apply for a Capitec consolidation loan:
In order to apply for a consolidation loan, you will need to provide your personal details and financials.
- ID document
- Three month bank statement
- Proof of employment / proof of income
- Latest salary slip and three months’ payslips
- Proof of residence
Capitec will review your application once the above documentation is processed and perform an affordability assessment. They will do an credit assessment check to determine your eligibility. Unfortunately, you’ll most likely be rejected if you have overdue accounts and a bad credit record. This also means if you are blacklisted then you will most likely be rejected. You should contact to the bank directly for capitec consolidation loans for blacklisted person. Read more about blacklisted loans and bad credit loan offers.
In order to get approval clients need to have a fair to good credit score. You can use the Capitec online quotation tool if you would like a quick estimate of repayments.
How do banks approve consolidation loans?
As we’ve previously mentioned, your credit history is one of the most important factors. However, banks, like Capitec have to take other things into consideration too.
They will look at what your income after tax is. Thereafter, they will evaluate your monthly expenses. This is broken down into expenses such as food, transport, rent, etc. They will also look at other financial obligations that you might have. This includes medical aid, school fees, insurance, and debit orders.
Once all of this has been determined they can then assess the amount of money you have left. This money usually goes towards your loan repayment.
What happens once you’re approved?
Capitec will either pay the creditors or pay the money into your bank account. If the money is paid into your account it will be your responsibility to pay creditors.
Capitec consolidation loans cover credit of up to R250, 000. This is taken over a period of 84 months. Capitec offers an interest rate of between 16.55 – 24.75%. Clients will also be required to pay a monthly service fee of R69. Furthermore, a once-off initiation fee of R1207.50 will also need to be paid.
If a client has taken out a consolidation loan of R250, 000 they’ll be expected to pay between R5 815 – R6 884. This will amount to a total repayment of R488, 454 – R578, 254 over 84 months. However, clients can always change the terms to make monthly repayments more affordable.
Please note the above figures are all estimates. The final repayment amount will be subject to each individual’s credit score.
Things to consider
If you’re interested in applying for a consolidation loan then you should take the following into consideration:
- Set a monthly budget – This will enable you to have some order with all your finances. Work out all your expenses and set money aside for your loan repayment.
- Consider your affordability – Don’t take out a loan if you know that you cannot make repayments.
- Do some research – Always find out what the terms of the loan are. Visit your nearest Capitec branch to find out more.
Capitec consolidation loans allow individuals in South Africa more financial freedom. This banking service assists thousands of people to settle debts in a span of time. It’s important to remember that consolation loans do not cover secured loans. For example, a consolidation loan will not include home loans and business loans, etc.
Ensure that you do not carry on taking out credit once you have taken out a consolidation loan. This implies to all accounts/loans that are covered by the consolidation loan.
Lastly, Capitec consolidation loans allow you to take control. Instead of paying a number of different loans, you get to pay only one loan, and potentially a more affordable loan option with a lower competitive interest rate. Furthermore, allowing you to free up additional extra cash flow.
It’s vital to be disciplined when taking out a consolidation loan. Try and set a monthly budget and save money whenever you can. Lastly, always practice good credit habits. If you cannot afford something, wait until you have enough money to purchase it. The last thing that anyone wants is financial problems. Always think smart and spend money wisely.