Debt consolidation is a debt management tool that lets individuals consolidate multiple payments into one, making it much easier to stay organised. The aim of debt consolidation is to achieve a lower interest rate, which allows you to save a lot of money.
It’s important to keep in mind that debt consolidation is ideal for over-indebted consumers and generally comes with high fees.
Undergoing debt consolidation doesn’t necessarily solve the problem, but is rather a temporary fix to being over-indebted. It may result in you having more disposable cash at the end of each month. You need to be careful so that you don’t end up accumulating more debt.
Spreading your payments over a longer period of time has both benefits and pitfalls. For instance, lower monthly instalments mean that you can end up paying interest for longer. This also means that you have to pay fees for longer, meaning that you may end up spending more in the long run.
When do you qualify for debt consolidation in South Africa?
- You need to be considered to be struggling with repayments.
- You’ll need to be willing to undergo a credit check. The lender will decide after assessing your credit whether you’ll have enough money left for the repayment of the loan.
- You’re likely to qualify if the risk is lower for the lender.
- If you’ve made one or two late payments you may qualify.
If you consolidate your debt it means that someone else is buying all of your debt and you are paying them back. Even though it is possible for you to do this yourself, getting help from a reputable debt consolidation company in South Africa can be more convenient and efficient.
Check to see if the company is registered. In South Africa, debt consolidation companies must be registered with the National Credit Regulator.
Interact with the company’s representatives in person. This way, you can get a better sense of what type of services you’re dealing with.
Shop around in order to find the loan that best fits your needs. You need to compare at least 5 different debt consolidation companies.