Debt Consolidation Loan vs Debt Review: Which Is Right for You?
With the repo rate rising and many households already stretched, more South Africans are asking how to bring several debts under control. The National Credit Regulator has noted that around 10 million consumers are considered over-indebted. Two common routes are a debt consolidation loan, where one new loan pays off your other debts, and debt review (debt counselling), where a registered counsellor restructures your repayments with your creditors. They suit different situations, so compare them in the table below before you decide, and compare NCR-registered lenders on saloansonline.co.za.
| Feature | Debt Consolidation Loan | Debt Review (Debt Counselling) |
|---|---|---|
| How it works | One new loan pays off several debts, leaving a single monthly repayment | A registered counsellor restructures your debts into one manageable payment and negotiates with creditors |
| Best for | People who can still afford their debts but want simpler, cheaper payments | People who are struggling to keep up with repayments |
| Typical term | One to six years, depending on the lender and loan amount | Set out in the restructured payment plan |
| Who may not qualify | People with a high debt-to-income ratio, a poor credit score, defaults or judgments | Not applicable, though you cannot take on new credit while under review |
| Main risk | It can create a false sense of freedom and lead to new debt, and it still costs interest | It affects your ability to get new credit until the process ends |
| Who to use | A bank or NCR-registered credit provider | An NCR-registered debt counsellor |
Before consolidating, add up the total you will repay on the new loan and compare it with what you would pay on your current debts. This article is for information only and is not financial advice, so consider speaking to a registered debt counsellor if you are unsure.
Sources
- How does debt consolidation work? (JustMoney)
- Consolidating your debt in South Africa (DebtBusters)
- The pros and cons of debt consolidation in South Africa (RCS)
- What is a debt consolidation loan? (News24 / ASISA)
- South Africans urged to avoid debt traps as festive spending begins (ChannelAfrica)