debt counselling or consolidation choices

DEBT CONSOLIDATION vs DEBT COUNSELLING

DEBT CONSOLIDATION vs DEBT COUNSELLING

What is the difference between Debt Counselling and Debt Consolidation? We have explained the Pros and Cons for each one, which will make it easier to decide which one is right for you!

Debt Consolidation

What is it? 

Debt Consolidation is taking out ONE LARGE LOAN to pay off many others.

How does it work? 

You apply for a Consolidation Loan with a credit provider.

Who Qualifies?

Anyone over 21 years of age who can prove they can afford the quoted monthly instalment and have outstanding debt to pay.

The Benefits?

One can often secure a lower interest rate or a fixed interest rate and the convenience of one affordable monthly payment.

The Negatives? 

The payment term of this new loan will be longer than that of your outstanding debt before the Consolidation Loan (5 years on average). It works out much MORE EXPENSIVE than if you were only paying off the existing debt as you must pay interest on interest.  Also, the temptation or need of spending the Consolidation Loan on things other than what it was intended for is too great which results in double the payments on double the debt.

Below is a calculation showing the REAL cost of a Consolidation Loan:

Original Debt:

DescriptionAmount BorrowedPlusAmount Owing
Loan 1R10,000.00Interest and feesR20,000.00
Loan 2R10,000.00Interest and feesR20,000.00
Loan 3R10,000.00Interest and feesR20,000.00
AMOUNT RECEIVEDR30,000.00OWINGR60,000.00

Original Debt with Consolidated Loan:

DescriptionAmount BorrowedPlusAmount Owing
ConsolidationR60,000.00Interest and feesR120,000.00
CASH RECEIVEDNO CASHNOW OWINGR120,000.00

Debt Counselling:

Debt Counselling is a lawful process of debt rearrangement designed to help you when you cannot meet your monthly living costs and credit agreements. It is the LAWFUL RIGHT of every adult South African to have the benefit of this relief under the National Credit Act 34 of 2005. Debt Counsellors are the only people in South Africa who can offer REAL Debt Restructuring.

Debt Counsellors are bound by a Code of Conduct and monitored by the NCR to ensure that their service is in line with the law and is of benefit to you, the person the law was designed to protect.

Who Qualifies?

All persons legally living in the borders of South Africa, who are over the age of 21 and have an income can apply for Debt Restructuring. People who can’t meet their monthly credit repayments and their costs of living (or who may not be able to meet their obligations in the future) may apply. If you have missed even one payment or none at all you may apply. The sooner you seek help the better. Once legal action has started it is often too late!

How does it work?

First, we analyse your budget. With friendly and helpful advice, we go through your income, living expenses and insurances then we put together a manageable budget for you where we can see what you have available for debt repayments.

If there is a shortfall we can see if you are over-indebted. You will then benefit from the relief of Debt Restructuring. All your monthly debt repayments are consolidated into a single, easy, reduced monthly payment.

The benefits?

All your Debt is paid in affordable single monthly instalments. Everything left in your account is yours! You will end up paying much less for your debt in total – you could literally SAVE THOUSANDS OF RANDS as we negotiate with your credit providers to lower the interest rates.  No more stress! You can afford to live and support your family knowing you have enough money every month. There is also a light at the end of the tunnel. As long as you make your monthly payments you are 100% protected. Your case is closely monitored by the Debt Counsellor and once you are finished the process there is no lasting black mark on your credit record. In fact, your credit record is spotless! You can re-enter the credit market and make healthy debt, for example, a home loan or vehicle finance.

The negatives?

You may not make new debt while under Debt Restructuring. You can withdraw if you can afford to pay your normalised monthly instalments or if you can settle your outstanding debt.

How long does it take?

Debt Restructuring is very personal – A plan is designed for YOU. Time periods vary depending on how much money you can afford to pay every month and the total amount of money you owe. Once your debt is paid off a clearance certificate is issued, and your credit record rehabilitated.

What does it cost?

An R50 application fee which is added to your first payment. That’s it! The cost of debt restructuring is built into your monthly repayment plan. We ask for no upfront fees. Our fees are exactly to the letter of the NCR published guidelines. There are no hidden costs. Fees differ from case to case. These will be explained on an application.

How can I apply?

Applying for Debt Restructuring couldn’t be easier. Our highly trained consultants assist you every step of the way, so you aren’t doing this alone. You can apply online, by email or fax, or in any one of our branches. Our consultants will even come to you!

 

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