When should you consider debt consolidation?

Can you relate to the following?

• You’ve maxed out your overdraft/credit cards
• You are falling behind on more than one debt repayment
• You are barely getting by with little to no monthly living expenses, after paying your debt obligations
• You have no extra money to save
• You’re thinking of selling your assets to help pay off debt
• You’re making new debt in the attempt to help pay off existing debt
• You’re not sure how much money you owe and to whom

Evaluate your situation

Make sure that making a debt consolidation loan is the right financial move for your situation. A lot of people cannot qualify for a debt consolidation loan as they have too much debt and the only option they have left is debt review. If you want to apply for a debt consolidation loan you should ensure that you have the affordability for this type of loan and that you are doing to get out of debt and not in order for you to make more debt once your credit score has improved. 

TIP: If you apply for a debt consolidation loan for the wrong reasons you will end up with much more debt, without a second way out. 

If most of your income goes towards debt and you have nothing left to live off it could be a major relief to consolidate. 

The purpose of debt consolidation

The purpose is to consolidate all your debt, with the view to freeing up cash flow and having better control over your debt. You should only consider debt consolidation if:

A new consolidation loan instalment amount will be lower than all your current debts added together. There is no point in taking on this new debt if it doesn’t free up some cash flow.

Your house will not be attached in the event that you fail to pay the loan as the consolidation loan is an unsecured loan for example.

The money will be used to settle all your smaller debts and is not in addition to your current debt.

Can you tick all these boxes? then a consolidation loan could save you money on monthly service fees, administration charges, debit order charges, and insurance costs. Debt consolidation will reduce your service fees because you will only have one account to pay as opposed to multiple accounts.

Qualifying for debt consolidation

If you are struggling with your debt repayments and have fallen behind, or are at risk of falling behind, you are over-indebted and will be able to qualify. Clients with a bad credit record or even blacklisted clients will also be able to qualify. 

TIP: You have to be employed or have a form of income to qualify for debt consolidation.

Financial relief and costs that will incur when applying for debt consolidation

You will experience immediate financial relief and both the counselling and legal fees are incorporated into the debt restructuring plan resulting in you not having to pay any additional/upfront fees for your application to be processed. Legal fees are determined based on the type of debt you have and your monthly repayment. You can cut your monthly repayment by almost half when consolidating. 

Attorneys are appointed to obtain a court-granted order for clients. This will prevent creditors from wrongfully terminating your application. You will then be legally protected and your creditor providers will not be able to terminate your debt restructuring agreement or take any legal action against you.