Involves taking out one large debt to pay out several old smaller debts, which would then be closed. This is ideal where you have several short-term, high-interest debts such as credit cards, payday loans and several personal loans. The main benefits are a lower interest rate, and the convenience of one payment.
Maureen has three separate personal loans amounting to R150, 000. Each loan carries a different interest rate, and the loans have different repayment terms. This makes it very difficult for her to keep track of her finances and ensure that repayments are paid on time. She is charged an average interest rate of 27.3% per year, and has already paid more than the value of the original debt. Deciding that enough is enough, Maureen applies for a debt consolidation loan. She uses the money from the loan to pay off her existing loans. Maureen now has a loan for R150, 000 over 5 years, with an interest rate of 27.3% per year. Her monthly repayment has only gone down R2, 663, and most importantly she will be debt free in 5 years.
Debt consolidation is one of the options out of a range of debt solutions for which DebtHub may assist you with. For more information on other options available, take a look at our Debt Solutions page
DebtHub is not a lender. We do not provide debt consolidation loans. We can assess the suitability of several debt solutions for those experiencing difficulty with their debts and submit your application to the best service provider.