Should you get a debt consolidation loan?

Find out the real cost of consolidating your debt into a single loan

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What are Debt Consolidation Loans?

If you are over-indebted with multiple debts, a consolidation loan from a debt consolidation company may seem like the ideal solution.

But, Debt Consolidation Loans have high interest rates and admin fees.

Should I get a debt consolidation loan?

Let’s look at a simple example:

Thandi is in debt
1

Thandi is in debt

All her hard-earned money is going into repayments.

Thandi cannot afford her monthly repayments. Her total owings is R250,000. With an average interest rate of 23%, it could end up costing her a total of R424,272. She currently pays R8,839 / month on her monthly repayment.

Thandi considers getting a consolidation loan
2

Thandi considers getting a consolidation loan

She notices most registered credit providers in South Africa only offer loans up to a maximum of R250,000.

She can extend her repayment term to lower her monthly instalment.

She considers repayment periods
3

She considers repayment periods

She can pay back the loan over the maximum repayment term of 84 months (7 Years) at a
yearly interest rate of 21.7%.

To obtain the loan, she needs to pay a once-off initiation fee of R1207,50 as well as an ongoing monthly service fee of R69.

She works out her monthly repayments
4

She works out her monthly repayments

Thandi would now pay R6,769 towards her
consolidation loan.

She can save around R2,070 on her monthly instalment.

She finds out the real cost of consolidation loans
5

She finds out the real cost of consolidation loans

How much did Thandi end up paying in total for her R250,000 debt consolidation loan including interest?

R568,569

She may have saved approximately R2070 p/m in repayments, but she increased her long term capital debt by R144,324

Understanding Debt Counselling

Also known as Debt Review

Let’s say Thandi investigates alternative options to long term debt. She finds out about a process called debt counselling.

Debt counselling is a service regulated by the NCR to ensure fair practice to those who are struggling to live due to indebtedness. Companies like Debt Rescue reduce your monthly payments while legally protecting you and your assets from creditors.

Thandi has R250,000 total owings. We see that she is struggling and that R8,839 of her income goes to repayments. Instead of moving her liabilities into a single loan and paying an additional R144,324, her debt counsellor will negotiate with her credit accounts directly to legally reduce her monthly repayments.

Specialised attorneys ensure she has enough to cover her living expenses without making credit card debt or taking a personal loan each month.

Thandi got in touch with us.

Her monthly repayments were reduced from R8,839 to R5,300. And she was also able to make additional payments to her credit providers on top of her repayment plan. Debt counselling covered all her owings, not just the amount she would have gotten from a consolidation loan. In the end, she managed to improve her credit score.

Are you over-indebted? Check out our debt calculator.

Debt Consolidation
Original DebtR250,000Monthly RepaymentR8,839
Consolidation LoanR250,000Monthly RepaymentR6,769
Debt Counselling / Debt Review
Original DebtR250,000Monthly RepaymentR8,839
Debt Counselling / Debt ReviewR250,000Monthly RepaymentR5,300

If you feel you are over-indebted and would like to find out more about Debt Rescue and Debt Counselling, request a free, personalised, no-obligation debt assessment now!

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Consolidation Loans vs Debt Counselling

Debt Consolidation Loan

Debt Counselling / Debt Review

Lower monthly instalments
Lower monthly instalments
A good credit score is needed
A good credit score is irrelevant
High-Interest rates, once-off initiation fees, monthly admin fees, service charges and more
Once-off application fee, once-off restructuring fee and a small monthly aftercare fee
Covers debt up to R250,000 – R300,000
Covers an unlimited amount of debt
No legal protection of assets
Legal protection of assets
One single monthly payment
(If the debt is below R300,000)
One single monthly payment
Debt Increases (high-interest)
Debt Decreases

Have a question about Debt Counselling?

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Debt review, also known as debt counselling, is a debt relief measure in South Africa that helps over-indebted consumers get out of debt. The National Credit Act (NCA) introduced the process in 2007 to prevent consumers from being blacklisted and having to deal with the consequences thereof. The process is ideal for South Africans with […]

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Q
How long does debt review last?
Debt review, also known as debt counselling, is a debt relief measure in South Africa that helps over-indebted consumers get out of debt. The National Credit Act (NCA) introduced the process in 2007 to prevent consumers from being blacklisted and having to deal with the consequences thereof. The process is ideal for South Africans with […]

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To understand exactly how long debt review lasts, you need to understand how the process works. How does debt review work? In 2007, debt review was introduced by the National Credit Act (NCA) to help over-indebted South African consumers. The process prevents consumers from being placed into personal administration and having to deal with the […]

Read more

Debt Review is a process introduced by the National Credit Act (NCA) to help over-indebted South Africans become debt-free. Only consumers who have successfully registered with a National Credit Regulator (NCR) approved debt counsellor, such as Debt Rescue, can be placed under Debt Review. Find out more about what Debt Review is here. I have […]

Read more

The possibility of car repossessions haunts many South Africans who have fallen behind on car payments. While the realisation that you cannot afford your car payments is extremely scary, we’re here to guide you through your available options. What is car repossession? When you sign a loan agreement, you commit to a contract. This contract […]

Read more

Debt review was introduced by the National Credit Act (NCA) in 2007. Since then, debt review has been an extremely effective way to get out of debt. Debt Rescue has saved thousands of South Africans from losing their assets, becoming blacklisted and allowing them to live without the heavy burden of debt taking away money […]

Read more

Thank you!

We look forward to the opportunity to get you debt-free!

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