Numerous South Africans find themselves over-indebted nowadays. Having too many debt repayments to make can often leave one stressed and frantic at the end of the month. Debt consolidation is an option that is becoming increasingly popular as a remedy for over-indebtedness in the country.
What is a Debt Consolidation Personal Loan?
A Debt Consolidation Personal Loan is a facility that allows individuals that are struggling to repay multiple debts to take out a loan that will help them settle several smaller loans. This process typically features replacing high-interest short term debt with a lower interest rate loan which usually has a longer term. There are usually stringent affordability criteria, so not many individuals may qualify.
Debt consolidation has a number of benefits. These may include:
- Improved cash flow
- Allowing you to get a clean start
- You have a manageable monthly loan payment as opposed to multiple payments to keep track of
- You save on multiple fees, service charges and debit order charges
- You can avoid foreclosures and repossessions
- Your monthly instalment becomes much lower, allowing you to repay the your debts over a longer period. This way you are under less pressure
Debt consolidation requires financial discipline. It’s important to use the funds you have saved through consolidation to pay off your debts as soon as possible. This way, you are able to save on having to repay for a longer period of time.
A Debt Consolidation Personal Loan can be secured or unsecured. In South Africa, none of the four big banks offers a pure debt consolidation product. Instead, they offer debt consolidation through personal loans to consumers with good risk profiles. These loans are granted to individuals who are not likely to default, and who are deemed as able to afford the loans.
Getting a Debt Consolidation Personal Loan is a great way to take better control of your finances and to help keep your credit record in good standing.