You can save as much as 20% a month – provided you’re vigilant when it comes to the interest rate charged. A lot of people shy away from debt consolidation because they don’t understand it or they’re not aware of its benefits, FNB has found. Uptake among its mainstream market customers shows that only 11% are taking advantage of this essentially very easy way to manage debt.
According to Pieter du Toit, CEO of FNB’s mainstream targeted Smart Product House, there are two key benefits to debt consolidation. The first is that loan repayments become easier to manage as you take out one loan to pay off several other debts. The second, most attractive, benefit is that customers save money through fewer bank charges.
Service fees, initiation fees and insurance charges are not duplicated, which represents quite a saving for customers. This obviously means more money left at the end of the month—or a quicker repayment of the total loan amount.
A typical basket of costs can be reduced by as much as 20% per month through debt consolidation.
A customer with five R5 000 loans across different financial institutions could be paying up to R600 per month purely on administration and insurance fees. By consolidating the loans, these fees would be reduced to R283 a month with an FNB Smart Send or Personal Loan.
A R5 000 loan over 24 months will cost R427 per month (five would cost the customer R2 135 per month) and a R25 000 loan over 24 months will cost R1 698 per month (R437 saving per month or R10 488 over the 24 months).
If you’d like to consider to consolidate your debt, speak to your bank -but find out what interest rate the consolidating institution offers. It’s obviously pointless if your loan repayments end up increasing because the interest rate they’re offering is higher on the consolidated loan than the individual loans.