When should you take out a Debt Consolidation Loan?

Mar 07, 2016
Author: Ean Barnard

“Being in debt is manageable, but drowning in it is no joy ride.”


You need all the information you can get in order to make the best decision for your situation, so you can turn around as fast and painlessly as possible.

So what is a debt consolidation loan?

It’s a loan that allows you to pay off your current debts with a single loan that has different terms than your current loans or credit card debt. So with other words, it is a form of Debt Refinancing that consists of taking out one loan to pay off several others. It mostly refers to a personal finance process of attending to high consumer debt. A debt consolidation loan usually provides the borrower with more favourable terms such as a lower interest rate and, therefore, a lower total monthly repayment. It is important to note that the lower interest rate of a debt consolidation loan, mostly exists as a result of an extended repayment term.

With a debt consolidation loan, you simply add together all the outstanding amounts you owe to various lenders and move the total amount to one debt consolidation lender. You will thus have one monthly instalment with one interest rate, and instead of paying countless individual lenders, you’ll only click once to pay. This makes your repayments easier to manage - BUT, it does not make them vanish into thin air.

So is a debt consolidation loan the answer to bad debt? It could be.

The reason this type of loan can be helpful to you is that it can solve three of your worst obstacles:


  1. High-interest rates
  2. High monthly repayments;
  3. Possible confusion because of too many bills to manage.

“If you find yourself in these not so blue suede shoes, there is a good chance that your debt could grow faster than you can pay it off. This is when a consolidation loan can prove to be a viable option.”


A Debt Consolidation Loan may allow you to get a lower interest rate, which would save you cash in the long run. It could be of super benefit to you if:


  • you would like to effectively manage your debts with a single loan,
  • enjoy a lower interest rate,
  • settle your debt in a cost-effective way.

It all depends on your situation. While there are some real benefits to debt consolidation, it is important that you do your part in understanding the wide range of options. We realise that there is a lot of information to think through as each person’s situation is different. So, we want to help you make the right choice, make use of the loan comparison page to compare lenders or read here on 5 awesome places to get a debt consolidation loan in South Africa.

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