If, for some reason, you are unable to repay the loan in that bank or are in arrears on a microloan, then the refinancing service is one of the compromise options for you. As a rule, banks agree to it, even with a decrease in the interest rate, in order to get some funds and not to bring the case to court.
In fact, refinancing is the execution of a new loan agreement in another financial institution, but on different conditions. It turns out that you take out a loan on more favorable and affordable terms for several years, and with its help, you repay the previous one (or several of them). Under the terms of refinancing, partial or complete debt coverage is possible.
How to Consolidate Your Debts
- Calculate how much you owe on all your loans.
- Find out how much you can pay off for your monthly debt.
- Find a lender that fits your budget.
- Take a loan from the lender of your choice.
- Use the proceeds to repay old loans.
- Start paying off your new debt as agreed with the lender.
Consolidation of Secured and Unsecured Loans
What debts can you avoid with debt consolidation loans South Africa? Debt consolidation is applied to both loans with a collateral and without it.
Collateral loans are used to secure valuables or assets. For example, people can use their house or car as a guarantee to repay the loan. The lender has the right to take a house or a car if he violates the agreement. Types of loans with a collateral include:
- Loans for business;
- Personal loans;
- Car financing;
- Loans secured by personal property;
- Loans secured by cash.
Unsecured loans do not require collateral. As a result, they are high risk debt consolidation loans, as they are exposed to greater risk for the lender and higher interest rates for the borrower. Typical examples are:
- Credit card debt;
- Unsecured loans for individuals;
- Smaller cash loans;
- Medical bills;
- Student loans.
Different Ways to Consolidate Debts
If you want to consolidate your debts in South Africa, there are many options to choose from. Most lenders will check if you are eligible for debt, income, and credit.
- Debt consolidation
Debt consolidation is designed to help repay a special debt. This can be done for many years and at low interest rates. No collateral is required to obtain a loan to consolidate debt.
Credit institutions registered in South Africa offer up to R250,000 at a rate of 15% or more. You will also be charged a minimum administrative fee for administrative formalities.
- Secured personal loan
This is an easy way to get a big loan, even if these are consolidation loans with bad credit. Lenders who offer authorized financial services will quickly provide you with this type of loan if you have valuable assets such as a car that you can use as collateral.
- Credit cards with bank transfer
New credit cards usually have an advertising interest rate of 0%. You can transfer the existing debt to this new card for additional interest. This can be done for free or cheaply.
Even when advertising interest is exhausted, standard prices can be very expensive. Therefore, credit cards only make sense if they shift the balance.
- Mortgage loans
This allows homeowners who have a stake in their home to take out a loan as collateral. The amount received is used to consolidate each debt. Debt consolidation loans for non homeowners are a kind of secured loan. Even if it offers low interest rates, there is a risk of losing your home if you do not pay your mortgage.
What is the Difference between Debt Consolidation and Personal Loans?
There is no real difference between a personal loan and a debt consolidation loan. When you use a personal loan for debt consolidation, it automatically becomes debt consolidation. Simply put, you can use a personal loan for everything, including debt consolidation.
However, some lenders offer specific consolidated loans to highly indebted people. In such cases, the lender will usually repay the loan quickly.
Benefits of Debt Consolidation
The main advantages of debt consolidation loans include:
- Debt repayment is managed;
- You can cut your payments by taking the time you need
- It can help you effectively manage your debt and deactivate your clients’ accounts.
However, a debt consolidation loan is not the only solution to all your financial problems:
- It will not help if you lost control of your debt burden;
- this allows even higher interest rates to be paid;
- it won’t eliminate your debt or fix your bad spending habits.
Keep in Mind when Consolidating a Debt Loan with a Personal Loan
Consolidation of a debt loan with a personal loan can help you save interest and manage your monthly payments. However, a debt consolidation plan should work. Consider the following before proceeding with your plan:
- Can you get a new monthly plan? – Get a personal debt consolidation loan only if you believe in the possibility of paying a new monthly installment.
- Can you handle the amount of debt? – Be honest with yourself. Can you control your debt? If it is excessive, debt consolidation may not be the solution.
- Can you reduce this amount of debt? – The only way to do this is to pay off debt while cutting costs.
- Is your credit rating good? -In some cases, it may be better to continue to pay off the debt this way than to apply for the consolidation loans for blacklisted. Because a bad credit rating means that the interest rates on your personal loans are higher.
What you need to get a consolidation loan
Applying for a debt consolidation loan in South Africa is simple and only requires the following:
- Proof of income for the last three months;
- Detailed report on wages for the last three months;
- Residence permit for less than three months;
- You must also be 18 years of age or older.
We hope that the information provided will help you quickly get out of the financial crisis and refinance all microloans with delays.