Consolidation loans up to R250 000
Loan consolidation happens when you take out a personal loan for the purpose of debt consolidation. If you are having trouble keeping track of your monthly bills and payments, debt consolidation could be your answer.
- ✔ Low interest rates
- ✔ Quick loan offers
- ✔ Free application without commitment
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Loan amount R100 - R250,000. Repayment terms can range from 3 - 72 months. Minimum APR is 5% and maximum APR is 60%.
Consolidation Loans South Africa
Many South Africans carry large amounts of debt. Banks, lenders, and financial institutions offer debt consolidation as a potential solution for burdened consumers.
A consolidation loan is an option when you have too many monthly payments. The idea is that you take all your debts—credit cards, store cards, personal loans, etc.–and combine them into one monthly amount. If you are overwhelmed with managing your debts, this is a way to simplify the process and give you peace of mind.
There are two main benefits. Firstly, moving the balances of all your outstanding debts into a single loan, leaves you with one monthly repayment. So, instead of having many payments to multiple creditors, the only payment is to the financial company where you got your consolidation loan. Secondly, the monthly payment will often have a lower interest rate over an extended period.
A debt consolidation loan won’t rid you of your debt immediately, but it will make it easier to manage your payments. Also, because you are paying interest on one loan—instead of several—you will be paying less interest overall.
Debt Consolidation Meaning
Consolidation simply means combining all small debts together and taking a larger loan to pay them off. Authorized banks and lenders offer debt consolidation services regulated by the South African National Credit Regulator (NCR). A reputable institution will adhere to the standards and rules laid out by the NCR and the National Credit Act (NCA) of 2005.
The goal with debt consolidation is to take all your loans and repayments and group them into a single payment. Ideally, this will result in a lower interest rate than you were paying before consolidation but it will depend on your credit score.
Debt Consolidation: Fees & Charges
When you apply for a consolidation loan you will be paying an initiation fee and service fee. Initiation fees will vary depending on the total debt and the number of credit agreements.
Service fees are charged for the day-to-day administration of your loan and are limited to a monthly charge of R60 plus VAT. This is set by the NCA.
In some cases, lenders require credit life insurance to cover the loan in the event of retrenchment, disability, death or dread disease. By and large, this also ensures that debt repayment doesn’t become a problem in times of crisis. Credit life insurance is capped at R4.50 for every R1,000 of the loan.
Short Term Loans and Consolidation
A debt consolidation loan is a short term loan for a fixed amount. Repayment terms of the loan are usually between 18 and 72 months, based on your risk profile. You repay this loan in equal instalments over an agreed period of time with a fixed annual interest rate.
Debt consolidation is a way to refinance when you are dealing with overwhelming debt, letting you combine all your short term debts such as credit cards, store cards and personal loans. And, consolidation loans do not require collateral.
If you only have several small debts and want to simplify your monthly payments, you could apply for a personal loan. This would let you settle the debts, leaving you with one affordable monthly payment.
- You are over 18 years old
- You are employed and employment has lasted for more than 6 months
- Your loan should not be more than 8 times larger than your monthly income
Interest Rates On Debt Consolidation Loans
In order to qualify for debt consolidation, you will need to show your ability to pay and meet the company’s requirements. Moreover, the terms you receive will also be based on your credit score and risk profile.
Debt consolidation won’t affect you credit score negatively unless you miss a payment. And, with only one monthly payment, there is less likelihood of that happening.
Keep in mind, that consolidation loans are only practical if the new interest rate is lower than the interest rates on your current loans. When you consolidate, a lower interest rate isn’t always guaranteed. Therefore, before you apply for a consolidation loan, it’s important to compare the interest rates on new and existing loans.
You can consolidate debt in two ways. Firstly, when you have met the qualifying requirements and the loan is approved, lenders add the funds to your bank account and you settle the debts.
Or secondly, when the financial institution settles your debts directly. But, before that can happen, you will have to give them settlement letters from your creditors.
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When you decide to refinance your debts and you are applying for a new loan, it could negatively affect your credit score by temporarily lowering it.
When you refinance, lenders always look at your credit history and credit score. This is a hard inquiry on your credit report and it will cause a slight dip, although this is temporary.
Since you will want the best interest rate, you may apply to multiple lenders. Several hard inquiries over a short period of time–14 to 45 days—will show as a single inquiry. In order to minimize any impact on your credit rating, it’s better to do your applications at the same time.
This solution also applies to secured loans. You can refinance home and vehicle loans for better interest rates. For example, refinancing will let you move an adjustable-rate mortgage to a fixed rate mortgage.
Before you apply for loan refinancing you will need to compare interest rates, monthly payments, extra fees, and the total cost of the loan.
Debt review is when you put your debt negotiations in the hands of a Debt Counsellor who will collate your debts, and examine your income. Together, you and your counsellor work out a payment plan based on your interest options and instalments with your creditors. Your Debt Counsellor will handle the negotiations with all the creditors on your behalf. The object is to make your debt manageable and protect you from creditor harassment, asset repossession, and legal action.
It helps to know that debt consolidation isn’t always the right solution and there are other options
- The interest rate you will be offered for your consolidation loan will fully depend on your credit score. So, the lower the credit score, the higher the interest rate.
- In the case of loan consolidation, missing or late payments can have a significantly negative effect on your credit score.
Loans For Low Credit Score
- A poor credit score hampers you in many ways. It lessens your chances of getting financial assistance in the future. As long as your score is low, you may have difficulty renting or buying a home and vehicle finance will be harder to secure.
- If your credit score is problematic, contact a debt counsellor who can guide you through debt review and help rebuild your credit.
Consolidation Loan Application Online
Requirements to Apply for Consolidation Loans
- The details of the bank account where your salary is paid.
- Three months of latest bank statements or payslips.
- A clear copy of your ID document.
- A current document confirming your residential address.
In conclusion, remember that a good credit record is your first requirement.
Consolidation Loan Calculator
By using loan calculator, you can easily calculate monthly expenses, loan terms and other fees that will apply to your consolidation loan. Additionally, this information lets you compare lenders, and loans and find the best offer for your individual situation.