You’ve likely heard the words ‘debt consolidation’ but are unsure what they mean exactly.
A large number of South Africans find themselves in a debt trap with too many accounts to
pay at the end of the month. Being in debt is a burden and can have severe emotional
effects. However, there are ways in which that you can lighten the load, and take a step
towards properly managing your debt.
So what is a Debt Consolidation Loan?
Simply put, this is a debt solution that was brought into being by the National Credit
Regulator, and is protected by the /National Credit Act. Its aim is to assist people who are
over-indebted by combining all the monthly debt payments. At the same time, there are
negotiations with the consumers’ creditors for reduced payment amounts.
How can it help?
If your application for a debt consolidation loan is approved, your credit provider will pay off
your remaining debt and place the remaining debt into a single, larger loan. This type of loan
typically has a longer repayment plan, thus significantly reducing the monthly instalments.
This does make repaying your debt more affordable.
The main benefit of a debt consolidation loan is that it reduces the number of creditors to
one. This can help you by simplifying your repayments, and makes it easier for you to
Points to consider
As you have lower monthly installations to meet each month, you may believe that you
have a bigger spending power. This is not true. The sensible thing to do is pay more than the
minimum requirement amount at the end of each month to further reduce the amount of
money you need to repay.
Another point to consider is that while you are no able to make the minimum monthly
repayments, you’ll remain in debt for a longer period of time.
A debt consolidation loan may be the help you need to break the surface of the debt you are
in. As with any long-term financial plan, careful consideration must be given to both the
benefits and the disadvantages.
Need more information regarding a debt consolidation loan? Speak to One Debt today for