What is Debt Consolidation?
Debt Consolidation entails consolidating debt into one manageable loan or monthly repayment. This streamlines finances making debt more manageable. Monthly installments are reduced and terms extended. The consumer can also request early settlement discounts .
Debt Consolidation - All Your Debt in One Payment
Debt Consolidation entails taking out one new loan or combining installments into one mangeable payment. This is offered to existing homeowners through our Credit Solutions like Bond Consolidation or through the Debt Review Process, for consumers who are starting to experience financial difficulties.
In effect, multiple loans and credit facilities are settled by the larger loan through Bond Consolidation, leaving only your home Loan to manage each month OR by combining installments at lower interest rates over longer periods through the Debt Review Process. Therefore a consumer is not getting rid of debt but merely combining multiple debt into one affordable payment over a longer term.
Debt becomes more manageable and stress levels are reduced.
The opportunity also arises in which the consumer can request early settlement discounts for the existing debt, thus further reducing the cost of debt in the form of interest charges.
How does Debt Consolidation Work?
Having only one installment each month improves cash flow and makes it easier to manage debt your debt repayment. Your monthly installment will be reduced and you will benefit from a lower interest rate. Each Credit Provider also applies its own monthly charge or annual card fee and so having only one loan with one company will also minimise these additional costs.
More Money, Less Stress with Debt Consolidation
If your application for debt consolidation is approved through bond consolidation, your Mortgage lender will pay off your outstanding loans with the further bond. If approved through Debt Review, the Debt Counsellor will consolidate your repayments to credit providers.
This makes repayment easier while also saving you money on admin fees. Admin fees are charged by each credit provider on each loan. The more loans you have the higher the admin fees will be that you pay each month. You will also save on Credit Life Insurance as you will only be insuring one loan.
Debt Consolidation usually has a loan term longer than those of your original credit agreements. This lowers your monthly installments which will increase you monthly income. By extending the term, the interest payable over the term will be more. You should consider trying to pay off your debt consolidation sooner than the term offered. Use annual bonus or additional income to achieve this.
Also remember that when your outstanding debt has been settled, store and credit cards remain open. If you have not been particularly good at managing these accounts in the past, we suggest that you close these accounts to prevent the temptation of accessing them again.
If you are disciplined with spending then leaving these facilities open will improve your credit score.
What does Debt Consolidation Cost?
We know that you can save money on admin and bank debit order fees by consolidating debt. If you have multiple loans with different interest rates, calculate the average interest you are paying and aim to find a Debt Solution with a better interest rate than that average. We will assist you with this with our various Debt Consolidation Solutions - selecting the one that assists you financially the most.
The Cost of Debt Consolidation varies depending on the product you choose
There are no out of pocket costs involved with Debt Consolidation. Costs are based on the product you choose, loan amount, term requested and interest rate offered.
FACTORS AFFECTING COST:
1. The amount of debt you need to consolidate.
2. The repayment term
3. The new interest rate.
We don’t use a ‘computer-says-no’ algorithm. We get to know each and every consumer and their specific needs. So if your financial criteria doesn’t fit the strict criteria of many other institutions, you could have more success here. After all, we want to say ‘yes’ to helping you get out of debt and prosper.
Once the assessment is complete and pre-approval granted for Debt Consolidation, we will make an appointment with you to discuss all the costs involved. The application will only proceed once you understand the costs and we have also covered all questions in a satisfactory manner.
Benefits of Debt Consolidation?
One benefit of debt consolidation is the monthly cash savings it provides in the form of reduced admin charges and bank costs. The other comes from consolidating debt into a lower interest repayment, which minimises the overall interest charged over the term.
One Easy Repayment with Debt Consolidation
The first obvious benefit to debt consolidation is that it reduces your multiple debt repayments into one. This helps you in two ways. It simplifies repayments, and it makes it easier to budget, since you know exactly how much will be debited from your account every month.
HERE ARE THE OTHERS:
You do not have to be Credit Worthy to qualify.
Any negative listings on the Credit Report are removed.
The Credit bureaus will show that each account has been settled or paid up.
Debt is reduced through lower interest rates and longer terms. .
Combine several credit facilities into one easily managed payment.
Managing one repayment instead of several loan repayments each month reduces stress levels.
Qualifying Criteria Debt Consolidation?
Certain qualifying criteria must be met for these Debt Solutions. Affordability ratios as well as Income to Debt Ratios are calculated to determine this. These requirements are in place to ensure that you can afford to repay the debt consolidation.
Important factors when applying for Debt Consolidation
While anyone can apply for Debt Consolidation even if they are not creditworthy, have adverse notices on their credit reports or are currently under Debt Review, there are still other important factors to consider before applying.
Permanently employed for at least 3 Months.
Affordability. There must be enough available income after living expenses to service the new monthly installment.
Total living expenses should not exceed Income.
You must have a valid South African bank account into which your salary is paid each month. Statements will be requested.