Debt counselling vs debt consolidation loan in SA: Choose wisely

With South African household debt levels remaining high and DebtBusters reporting a 47% increase in demand for online debt-management services compared with the previous year, understanding which option applies to your situation has never been more important.

If you’re juggling multiple debt repayments, falling behind on accounts, and taking stressful calls from creditors, you may be anxious to find a simpler solution that suits your situation and brings peace back into your everyday life. Maybe you’ve considered taking out a loan to pay off your debt, or wondered if debt counselling can get you out of debt for good.

At the same time, you may not be entirely sure of the difference between debt consolidation and debt counselling. We explain the nuances, explore the benefits of each solution, and weigh up which option may be best for you.

What is debt counselling?

Debt counselling is available to anyone who is overindebted and has a steady income. 

You’re overindebted when your debt exceeds your income after covering essential living expenses.

The terms “debt counselling” and “debt review” are often used interchangeably. In practice, both refer to the National Credit Act (NCA) process that helps overindebted consumers restructure their debt and make repayments more affordable.

DebtBusters considers consumers using 40% or more of their income for debt repayments to be overindebted. However, the DebtBusters Q2 2026 Debt Index shows that DebtBusters clients need 64% of their take-home pay to service debt – a worrying level of indebtedness.

If you’re in this situation and missing payments, you may face higher interest on your debt, a possible negative impact on your credit score, and significant financial stress.

Debt counselling, introduced through the NCA, can help you regain control of your finances. A qualified debt counsellor will assess your finances, negotiate with your creditors, and help create a repayment plan you can afford. This can provide relief from the pressure of unmanageable debt.

Essentially, this new payment plan can simplify your life by combining multiple debt repayments into one monthly instalment.

While debt counselling has several advantages, it’s important to know that you can’t take on any new credit while under debt counselling. While you cannot access more credit, the process frees up cash so they don’t need to.

Once your unsecured debts are settled and your bond is up to date, you receive a Section 71 clearance certificate, completely removing the debt review flag from the credit bureaus.

Key benefits of debt counselling

Get non-judgemental, personalised support: You receive a personal affordability assessment based on your actual income and essential living expenses, giving you expert guidance on a realistic budget that works for your life.

Keep your home and vehicle: Placing your accounts under debt review provides immediate protection under the NCA, making your life easier by stopping creditors from contacting you directly. Your essential assets are protected against legal action or repossession.

Lower your monthly debt repayment: Registered debt counsellors negotiate directly with credit providers to potentially reduce interest rates and extend repayment terms, consolidating multiple accounts into a simpler, reduced monthly repayment.

Rebuild your credit record: Once your unsecured debts – credit cards, personal loans, and store accounts not tied to an asset a lender could repossess – are settled, you receive a Section 71 clearance certificate.

Once you have met the requirements for a clearance certificate, the debt review flag is removed from your credit record, allowing you to apply for credit again if you choose to do so.

As South Africa’s leading and most trusted debt counsellor, DebtBusters walks with you through the entire process, helping you reduce financial pressure and stay on track while negotiating with credit providers on your behalf, so you can take back control and bust debt for good.

What is a debt consolidation loan?

A debt consolidation loan is a viable solution if you’re debt-stressed. Instead of paying multiple credit providers, you take out one bigger loan, settle all your debts, and then focus on repaying the one loan.  

Unlike debt counselling, which is a formal debt review process, a consolidation loan is simply a new loan used to settle existing debts.

Note that the interest rate on the new loan could be higher than the rates on some of your original debts. The repayment period may also be longer, costing you more in interest over time.

You’ll also need a good credit score, a regular income, and the discipline to avoid getting into debt again. Otherwise, there’s a risk of accumulating new debt on top of your consolidation loan, leaving you worse off than when you started.

If your credit score is already impaired, or you don’t qualify for a new loan, a traditional debt consolidation loan may not be an option. If so, debt counselling can provide an alternative way to consolidate your debt by combining multiple repayments into one reduced monthly instalment, without requiring you to qualify for new credit.

This can make debt counselling an option if you’re struggling with debt but don’t qualify for a new loan.

Key benefits of a debt consolidation loan

• Simplicity: One monthly payment replaces multiple instalments.

• Potential cost savings: If you can get a lower interest rate than the rates on your current debts, you could reduce your overall costs. For example, the new interest rate may be lower than the rate applied to a credit card or short-term loan.

• No debt review flag: Consolidating debt through a loan doesn’t trigger a formal debt review notification on your credit report. However, each application for credit can result in a hard enquiry on your credit report, and multiple hard enquiries in a short space of time can affect your credit score. This is worth keeping in mind if you’re comparing loan options.

Can you consolidate debt without taking out a new loan?

Debt counselling is also a form of debt consolidation. Instead of applying for a new loan, a registered debt counsellor works with your creditors to restructure your debt and combine multiple repayments into a single monthly instalment.

The key difference is that you don’t need to take on new credit. Rather than using a new loan to pay off your existing debts, debt counselling reorganises your current debt into a more affordable repayment plan.

This can be particularly helpful if you’re overindebted or unable to qualify for a debt consolidation loan because of your credit record. For many consumers, it provides a way to simplify their finances and regain control of their debt without borrowing more money.

If you’re struggling to keep up with repayments and don’t qualify for a new loan, debt counselling may offer a practical alternative while still delivering the simplicity of a single monthly payment.

Learn more about consolidating your debt without a loan.

How to consolidate credit card debt in South Africa

If you’re struggling to keep track of multiple credit card and store account repayments, consolidating your debt could make your finances easier to manage. Both a debt consolidation loan and debt counselling can combine multiple debts into a single monthly repayment, but the right option depends on your circumstances.

For example, if you have three credit cards and two store accounts, you may currently be making five separate payments every month. A debt consolidation loan can pay off those debts and replace them with a single new loan. However, you’ll need a good credit score and sufficient income to qualify.

If you don’t qualify for a new loan, debt counselling may be the better option. Rather than taking on new credit, a registered debt counsellor can help restructure your existing debts into a single monthly payment. This helps you simplify your finances while working towards becoming debt-free.

Debt counselling or debt consolidation loan: Which one should you choose?

If you’re overindebted, debt counselling offers legal safeguards and a clear structure for settling your accounts.

If you simply want the convenience of fewer monthly repayments and can secure a favourable loan, a consolidation loan might be more convenient.

The right option depends on your income, credit profile, and how difficult it has become to keep up with your repayments.

Choose debt counselling if: you have multiple debts, are struggling to keep up with repayments, and would not qualify for a new loan. Debt counselling can help you restructure your debt into a more affordable repayment plan while providing legal protection under the NCA.

Choose a debt consolidation loan if: your debt is still manageable, you have a good credit score, and you simply want the convenience of replacing multiple repayments with a single monthly loan repayment.

Consider debt counselling urgently if: you have already fallen behind on your repayments, creditors are contacting you, or you’ve received a Section 129 notice. Seeking assistance sooner rather than later may help you avoid further financial stress and legal action. You have 10 business days from receiving a Section 129 notice to respond before your credit provider can proceed with legal action.

Debt counselling may also be the better option if: your debt includes a home loan. Because home loans fall within the NCA framework, debt counselling can help restructure these obligations alongside your other qualifying debts as part of a broader repayment plan. Importantly, your home loan doesn’t need to be fully paid off for you to receive a clearance certificate – only your unsecured debts need to be settled.

Seeking professional assistance

If you’re still unsure whether debt counselling or a debt consolidation loan is the right option for your situation, DebtBusters’ consultants can assess your finances and explain the solutions available to you. They’ll help you understand which approach best suits your income, debt levels, and credit profile.

The sooner you seek advice, the more options you’re likely to have. Complete the call-back form below and a DebtBusters consultant will contact you to discuss your options.

Contact us:

• Email: info@debtbusters.co.za

• Phone: 086 999 0606

Take charge of your finances today. DebtBusters can support you every step of the way, one repayment at a time.

FAQs

1. Does debt counselling affect my credit score?

Yes, but this is a protective step on your journey to financial freedom. Your credit report will note that you’re under debt counselling, meaning that you may not apply for new credit. Once the process is complete and you’ve settled your debts, your record will be updated. Your credit score will steadily improve as you pay your instalments.

2. Can I be under debt counselling and take out a debt consolidation loan at the same time?

No. While you’re under debt counselling, taking out any new credit – including a debt consolidation loan – isn’t permitted, as debt counselling requires you to stop taking on new debt while your existing obligations are restructured. However, if you’ve already taken out a consolidation loan and are still struggling with debt, you can apply for debt counselling afterwards.

3. Do I need a good credit score to consolidate my debt?

If you opt to consolidate your debt through a loan, you’ll need a good credit score because lenders will check your creditworthiness before approving the loan. If you opt for debt counselling, you don’t need a good credit score.

4. What is the difference between debt review and debt counselling? 

There isn’t one – they refer to the same process. “Debt counselling” is the term used in the National Credit Act and by the National Credit Regulator, while “debt review” is a widely used alternative name for the same process. You’ll see both terms used interchangeably, including by debt counsellors themselves.

5. Can I consolidate debt if I’m blacklisted or have a bad credit record? 

There’s no official “blacklist” in South Africa – it’s shorthand for having a poor or impaired credit record. If your credit score is low, you are unlikely to qualify for a traditional consolidation loan, since lenders check creditworthiness first. However, if you are overindebted, you will qualify for debt counselling under the National Credit Act regardless of your credit score, as long as you can prove you have some regular income.