Should you get a debt consolidation loan?

Find out the real cost of debt consolidation loans

Understanding Consolidation Loans

If you are over-indebted, a consolidation loan may seem like an ideal solution.

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

Let’s look at a simple example:

1

Thandi is in debt

All her hard-earned money is going into debt repayments.

She cannot afford her monthly repayments. She owes a total of 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 instalments.

2

Thandi considers getting a consolidation loan

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

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

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.

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.

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 debt repayments, but she increased her long-term capital debt by R144,324

Understanding Debt Counselling

Become debt free with Debt Rescue!

Let’s say Thandi investigates alternative options. 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 debt. Companies like Debt Rescue reduce your monthly payments while legally protecting you and your assets from creditors.

Let’s look at Thandi’s R250,000 total debt. We see that she is struggling and that R8,839 of her income goes to debt repayments. Instead of moving her debt around and paying an additional R144,324, her debt counsellor will negotiate with her creditors directly to legally reduce her monthly repayments.

Specialised attorneys ensure she has enough to cover her living expenses without using credit each month.

Thandi got in touch with Debt Rescue who took care of everything.

Her monthly debt 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 debt, not just the amount she would have gotten from a debt consolidation loan.

Are you over-indebted? Check out our calculator.

Debt Consolidation
Original DebtR250,000Monthly RepaymentR8,839
Consolidation LoanR250,000Monthly RepaymentR6,769
Debt Counselling
Original DebtR250,000Monthly RepaymentR8,839
Debt CounsellingR250,000Monthly 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

Consolidation LoanDebt Counselling
Lower monthly instalments
Lower monthly instalments
Good credit score needed
Good credit score irrelevant
High-Interest rates, once-off initiation fee, monthly admin fees, service charges and more
Once-off application fee, once-off restructuring fee and a small monthly after care 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 payment monthly
(If debt is below R300,000)
One single payment monthly
Debt Increases (high interest)
Debt Decreases

Have a question about Debt Counselling?

Have a burning question? Take a browse through our most frequently asked questions to learn more about Debt Review

Debt Review cannot make you lose your home or your vehicle.

It can however save your home and vehicle, but this will obviously depend on your unique circumstances. Factors that will determine this will include the following:

  • Have you received a Section 129 letter from your Credit Provider, and if so, how long ago?
  • Have you been served with a summons in respect of your mortgage bond or vehicle finance?
  • How many vehicles do you have and what are they used for?
  • Are you giving your full cooperation in the program?

You will immediately experience the relief that Debt Review offers.

Within the first 5 days, we will work out a provisional repayment plan for you which you will be able to afford. In terms of the provisional repayment plan, you will make a single payment to a Payment Distribution Agency, who will distribute the money according to your plan. During the first 60 working days, your Credit Providers will not be allowed to implement action against you. During this time we will prepare your final repayment plan.

Our fees are regulated by the National Credit Regulator and are very reasonable, as the idea is to get you out of debt. The fees will be explained to you in detail once you contact us. The important thing to remember here is that our fees and disbursements are included in your affordable debt repayment plan.
Q
Will I lose my house or my vehicle when I am placed under Debt Review?

Debt Review cannot make you lose your home or your vehicle.

It can however save your home and vehicle, but this will obviously depend on your unique circumstances. Factors that will determine this will include the following:

  • Have you received a Section 129 letter from your Credit Provider, and if so, how long ago?
  • Have you been served with a summons in respect of your mortgage bond or vehicle finance?
  • How many vehicles do you have and what are they used for?
  • Are you giving your full cooperation in the program?

You will immediately experience the relief that Debt Review offers.

Within the first 5 days, we will work out a provisional repayment plan for you which you will be able to afford. In terms of the provisional repayment plan, you will make a single payment to a Payment Distribution Agency, who will distribute the money according to your plan. During the first 60 working days, your Credit Providers will not be allowed to implement action against you. During this time we will prepare your final repayment plan.

Our fees are regulated by the National Credit Regulator and are very reasonable, as the idea is to get you out of debt. The fees will be explained to you in detail once you contact us. The important thing to remember here is that our fees and disbursements are included in your affordable debt repayment plan.

Thank you!

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