Most credit active consumers think the best way to settle debt is by taking out a consolidation loan. Consolidation loans do not settle debt, they merely group up your debt obligations into one new loan amount. The benefit is one monthly repayment with one interest amount as opposed to paying varying interest rates across multiple debt obligations. When you take out a consolidation loan, the amount borrowed is used to settle your old debt obligations, leaving only the consolidation loan for you to repay each month. In summary, a consolidation loan pays multiple old loans with another bigger new loan. You are essentially paying old debt with new debt.
25 April 2016
The SARB increased interest rates in March 2016 in an attempt to curb inflation in South Africa. As a result the cost of borrowing money increased as well, leaving over-indebted consumers feeling even more stretched to make ends meet. Many South Africans have become dependent on monthly payday loans. In an attempt to free themselves from this debt-trap, they are having to resort to bad debt consolidation loans. Unfortunately, a bad debt consolidation loan will mean you end up paying even more for your debt and for many, they will never be able to pay it all off.
April was a tough month for South Africans with increases in fuel, electricity, interest rates, sin tax, food and the general cost of living. More financial challenges lay ahead for us as a result of the recent drought and food inflation that does not appear to be slowing down. Now, with the winter months upon us, the cost of living is sure to spike further as South Africans look to keep warm.
Have you adjusted your budget?
Be prepared for winter by adjusting your budget for:
- Increased costs in electricity
- Increase fuel costs
- Inflationary costs on living expenses
- Repo rate increases – which means your debt repayments would have increased
- Potential repo rate hikes in May
- Increases in school fees
- Increased electricity usage in winter
- Increased food consumption in winter
You may feel overwhelmed with all these added expenses, but it’s better to be prepared and know what your shortfalls are so that you can attempt to cut back wherever possible. Avoid the debt scare this winter and more importantly, avoid having to turn to a bad debt consolidation loan.
For more advice and debt tips, contact DebtBusters on 086 999 06 06 today!