Debt Consolidation

November
8

Debt counselling versus debt consolidation – let’s explain

If you’re struggling with managing your debt, you may be considering debt counselling or a debt consolidation loan as possible solutions to ease the financial strain. It is important to understand the difference between these two debt solutions, as although both are aimed at making managing your debt easier, they are two differently designed processes.

The five need-to-know differences are:

  1. The process:

Debt counselling allows you to consolidate your debt without having to take out an additional loan. The debt counsellor will negotiate lower interest rates and fees with credit providers on your behalf, and arrange a restructured, combined monthly repayment amount.

Debt consolidation requires you to combine all your debts by taking out a bigger loan to cover your smaller loans. The idea is to make it easier for you to manage your debt by making one repayment towards the consolidation loan each month, rather than worrying about paying various credit providers each month.

  1. Taking out credit:

Debt counselling prevents you from taking out any further credit while you are under the debt counselling process. This is for the consumers own good as the debt counsellor will restructure your repayment plan so that you have enough money to afford your living expenses each month, and taking out more credit will only hinder your financial situation further.

Debt consolidation allows you to apply for further credit. While this may seem ideal, many people are not disciplined enough to steer clear of wracking up more debt and managing it properly. This could result in a consumer becoming over indebted and needing to go under debt counselling.

  1. Protection from creditors:

Debt counselling gives you full legal protection from creditors, as outlined in section 86 of the National Credit Act. This means that all communication will go through your designated debt counsellor.

A debt consolidation loan on the other hand means that creditors are still free to contact you.

  1. Your assets:

The debt counselling process is designed to protect you from the repossession of your assets.

A debt consolidation loan will not protect your assets from repossession as part of the agreement.

  1. Qualifying criteria:

The debt counselling solution is designed for those who are gravely in arrears with their debt repayments and struggling to manage it.

For debt consolidation, the minimum criteria is a clear credit record and no existing arrears on debt repayments. Further, for debt consolidation to work, consumers must be sure that they are able to afford the monthly instalment every month, which is typically not possible for debt counselling candidates.

If you’re in over your head when it comes to managing your debt, you may need to consider contacting a trusted debt management company. At Debtbusters we will find the best debt solution for you and walk you through the process – one step at a time.

December
27

What is debt consolidation?

Debt consolidation is a loan that you would take out to consolidate several smaller loans into one loan. Basically, paying off the balances of all the other loans. The goal of a consolidation loan is to reduce monthly instalments usually by means of lower interest rates and extended payment terms. If this sounds like a solution that could work for you, it is worth your while to look a little deeper into the advantages and disadvantages of a consolidation loan. So let’s have a look at some of them.

Advantages

  • You only have one payment at the end of the month.
  • Your monthly instalment should normally be less than the total instalments of the consolidated debt put together.
  • You can pay off those accounts which might have potentially caused you to tarnish your credit score.

Disadvantages

  • Although you might save in the short term because of reduced interest rates, consolidation loans normally stretch over longer periods of time so you might end up paying more towards your debt in the long term.
  • Consolidating your debt can potentially open doors for more poor spending habits. Paying off your debt can give you a false sense of financial freedom, but those credit cards or over drafts will still be available to use and this might cause you to fall into a worse debt situation.
  • Your debts do not reduce when you consolidate them, you only replace one or many debts with another one. Which will not be a good idea for over-indebted consumers.

While debt consolidation might be a good solution for consumers who are not over-indebted and want to make payments more manageable, it is not always a solution. So what are the alternatives? The main one is the process of debt review. This process takes into account all of the consumers’ debt and it establishes an affordable payment structure to get the consumer out of debt, rather than simply one loan.

This ensures that your monthly payments are a lot more affordable and also provides protection against credit providers who harass consumers. So if you are serious about getting out of debt, this might be the solution for you. You will feel supported in the bottomless pit of debt and you can look forward to a brighter financial future.

April
25

Winter woes and those bad debt consolidation loans

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!

April
20

Enjoy a hassle free winter by getting a consolidation loan

Winter is just around the corner and your spending patterns usually change during the colder months. This makes sticking to your monthly budget a bit of a challenge (who can resist those warm soups in the pouring rain). You will also notice that you spend more on electricity, warmer clothing and medication. Managing your personal needs through winter can be costly, especially when in addition to a mounting number of debt repayments, which when all put together, can easily become a frustrating affair.

Don’t be left in the cold. A debt consolidation loan could be your answer to a stress free winter!

What is a debt consolidation loan?

A debt consolidation loan is usually taken out by people who are struggling to manage all their monthly account payments. This is a loan which is used to settle all your accounts, leaving you with only one consolidated loan amount to pay off. A consolidation loan can prove to be a viable method of debt re-financing and if done properly, can save you some money.

Key indicators to show you need a debt consolidation loan:

  • When most of your income is used for servicing your debt
  • When you are taking out additional loans to pay for existing debt
  • When you are struggling to keep track of your monthly expenditure
  • When you lose track of which credit providers you are paying monthly

What a debt consolidation loan can do for you:

  • Enjoy a reduced instalment paid to creditors, thus increasing your affordability
  • BIG savings on service costs, administrative fees, debit order charges and insurance costs by not having to service multiple accounts
  • Simplified repayments of debt to one creditor monthly as compared to paying multiple accounts
  • Your property will not be at risk if the debt consolidation loan is done as an unsecured loan. For example, your house will not be attached to the loan in the event that you fail to pay your instalments.

DebtBusters is there to help you every step of the way, what are you waiting for, call 086 999 06 06 or fill in our call back form and speak to a consultant to see if you qualify for a consolidation loan.

February
23

When is a Debt Consolidation loan a good idea?

What is a Debt Consolidation loan?

Taking a Debt Consolidation loan could be an effective method for debt re-financing. It involves taking out one larger loan to settle many others. It is a financial solution designed to simplify multiple debt repayments and, under some circumstances, save the debtor money. The process essentially involves taking out a new, single loan, at the lowest possible interest rate, to pay off multiple smaller debts.

The purpose of Debt Consolidation?

The purpose of Debt Consolidation 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:

  1. The new consolidation loan instalment amount is lower than all your current debts added together. If it doesn’t free up some cash flow, there is no point in taking on this new debt.
  2. .The consolidation loan is an unsecured loan for example, your house will not be attached in the event that you fail to pay the loan.
  3.  The money is used to settle all your smaller debts and is not in addition to your current debt.If you can tick all these boxes, a consolidation loan could save you money on monthly service fees, administration charges, debit order charges and insurance costs. Debt consolidation reduces your service fees because you will only have one account to pay as opposed to multiple accounts.

How to know you need Debt Consolidation?

Typical indicators are the following:

  • You are not sure which credit providers you are paying every month
  • You are unable to keep track of your monthly debt instalments
  • You are taking out loans to settle existing debt
  • Most of your income is being used to service debt

How to apply for Debt Consolidation?

If you are in need of financial assistance and are experiencing any of the above situations, call DebtBusters on 086 999 06 06 to speak to a debt expert who will be able to help you.

December
13

Debt Consolidation loans can be your ticket to debt relief

At DebtBusters, we know that it can difficult to manage your finances, especially if you’re already in a sticky situation. The good news is that with debt consolidation; you could make paying your debt in 2016 a little easier for yourself.

January often brings with it financial strain. By now you should have prepared your 2016 family budget. If you have, well done, but remember that implementation of your budget needs to start now…and not in 2016. If you have not, then we suggest you prioritise getting it done now before you rush off on a last minute Christmas shopping spree.

There is a very good reason why you need to start implementing your plan now; you are likely going to receive your end of December pay early. Without proper planning, you could get carried away with Christmas spending, leaving you and your family with little to no cash flow for the end of the month bills and the extra expenses that the start of the New Year brings with it. By planning and putting the right amount of money away now, you can avoid a situation where you can’t afford your monthly living expenses, back to school costs and debt repayments.

If you find after doing your budget for 2016, you are in a tight spot and need to reduce your debt repayments and free up some cash flow, then here is what you could do;

First things first, negotiate with your creditors

Don’t leave calling your credit providers till it’s too late. If you can see that you are going to struggle to make some of your debt repayments in January, speak to your creditors about it today. You’ll be surprised how accommodating they can be in assisting you to not only make a payment that satisfies them, but also keep your credit record intact. It is better to negotiate a reduced payment for a few months that to simply short-pay or not pay at all.

Consolidate your debt

If you find you are still struggling, after you have negotiated lower repayments with your credit providers, then you could apply to consolidate your debt. Debt Consolidation can be a very effective method for debt re-financing. It involves you taking out one bigger loan to settle all your other, smaller loans. It is a solution designed to simplify multiple debt repayments and could save you if the interest rate on the new loan is lower than that of your other smaller loans. The benefits include;

  • Only having to pay one credit provider
  • A lower monthly repayment (if the interest rates are lower)
  • A saving on service fees, administration charges, debit order charges and insurance costs
  • It will appear to credit bureaus that you have paid up your smaller accounts and your credit score should improve

How much does Debt Consolidation cost?

There are costs pertaining to debt consolidation, but they are not significant when you consider the money you will save from consolidating your debts in the long run. Similar to securing a loan, your interest charged on the consolidation loan will be determined based on your credit history.

How to apply for Debt Consolidation?

If you are in need of financial assistance and are experiencing any of the above situations, call DebtBusters on 0869 99 0606 to speak to a debt expert who will be able to guide you through the process of applying for debt consolidation.

July
31
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Debt Consolidation Loans aren’t all they are cut out to be!

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.

July
29
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Is a bad debt consolidation loan the answer to debt?

It is half past three in the morning and Viwe cannot fall asleep. Ever since she was a student at university, using credit has been a fast and efficient way to fund her entertainment and living expenses. Now, five years after graduating, she is kept awake by what feels like a never-ending nightmare. Viwe is caught in a debt trap and needs a bad debt consolidation loan! Each month Viwe has to find enough money to pay her many accounts. She juggles things around, paying one this month, skipping next month to pay another; robbing “Peter to pay Paul” and borrowing more to avoid legal action. All of this leaves her feeling confused and dizzy. By the next month she doesn’t know what is left in her bank account and can’t remember who she has paid and who she owes! With each month and year that has passed, Viwe has missed many of her monthly instalments to various credit providers and has started to accumulate additional interest and fees on her accounts in arrears. Her credit score has been severely impacted and she can no longer get credit. She is trapped!

August
4
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Facing the threat of asset repossession?

Repossession is the final stage of legal action and is most commonly seen with assets accounts (house, vehicle or furniture). If there has been a deviation from the required credit agreement, credit providers have the right to proceed with legal action to allow them to recuperate the outstanding debt. Repossession is the final tactic used and involves taking back then selling the asset on auction in order to obtain funds to thus reduce the outstanding debt owed. Please note if the sale of the asset does not settle the outstanding debt you are still liable to pay the shortfall. If you are threat at asset repossession, do something before it is too late!

July
24

DebtBusters, South Africa’s Top Debt Counsellor for 2014

DebtBusters, South Africa's Top Debt Counsellor for 2014 - The first ever Debt Review Awards was held on 19 July 2014 in Cape Town, to celebrate business excellence in debt review and to make heroes out of those who are responsible for leading the industry. Credit providers, debt counsellors and payment distribution agencies from South Africa were nominated in order to ensure that all parties in the industry were acknowledged for their efforts. The awards were separated into two categories; Public Voting Awards and Industry Panel Awards. The IDM Group, the holding company for both DebtBusters and Consumer Debt Help, is proud to announce that both respective companies walked away with awards.