Debt Restruct

What is Debt Consolidation and How Does it Work in South Africa?

Most people have heard of debt consolidation, but not many people understand how it works or know how it can benefit them. With approximately 25 million South Africans living with some form of debt and nearly 40% of them struggling to stay up-to-date with their payments, answering the question “what is debt consolidation” is essential.



What is Debt Consolidation

The act of consolidating debt refers to combining multiple debts repayments or instalment into a single debt repayment. This can be done by consolidating all of your debts into one single payment or combining your debts into one single, larger loan.

The advantage of consolidating debt is that you can get a lower interest rate on the combined debt, and you will often be able to pay off your debt more quickly.

Debt consolidation is a viable option for people who are struggling to pay their bills or who are finding it difficult to handle their debt on their own.

This may be because they struggle to make the monthly payments on their current debt or struggle to pay all of the fees and interest on their debt.



Debt Consolidation Options

If you are looking for a debt consolidation option in South Africa, you need to consider your needs and the available options.

 Let’s take a look at the different types of debt consolidation options.


Debt Consolidation Loans

Debt consolidation loans are often the most convenient option for people who are struggling to pay their bills. With a debt consolidation loan, you will be able to combine all of your debts into one single loan, which you will pay off over time.

Currently, there are two types of debt consolidation loans consumers can choose from:

  • Secured loans: These loans are secured by a specific asset. In other words, the lender will be able to seize the asset and sell it if the borrower fails to make the payments.
  • Unsecured loans: These loans are not secured by any asset. If the borrower fails to make the payments, this may lead to collection attempts, negative reporting on your credit, and even the potential for lawsuits. 


Applying for Debt Review to Consolidate Your Debt

Debt review or debt counselling is available to over-indebted South Africans. Debt review companies in South Africa help consumers to escape the debt trap by consolidating their debts, reducing the monthly debt repayment, and dealing with creditors on their behalf.

The debt review gives you a clear overview of your total debts and provides a clear path towards debt freedom.

Check to see if you qualify to reduce your debt instalment with our quick quiz

How Does Debt Consolidation Work?

Consumers deserve a service that is efficient, affordable, and easy. The biggest problem for consumers is how to deal with the fees and how to pay back the debts. Therefore, South Africans need effective debt consolidation tools. If you’re unsure where to begin, start with further educating yourself on debt consolidation loans and debt reviews.



How Do Debt Consolidation Loans Work?

Debt consolidation loans involve an entire process that looks at each of the loans and accounts that you currently have and then determines which can be combined under the new single loan – the debt consolidation loan. Then lenders will then examine your financial situation and your ability to pay back the loan.

The lenders may also look at your credit score, and how much you are likely to pay back on the loan.

If you are approved for a debt consolidation loan, then the loan provider will pay you the agreed-upon amount so that you can pay off all your existing loans.

In fact, some lenders may make the payments to your existing debtors for you to ensure the loan money is going towards the agreed accounts. 

Once your existing loans are paid off, then you simply have to focus your time and attention on paying off your new lender and the single repayment figure.



How Does Consolidating Your Debt Through Debt Review Work?

The South African government introduced debt review specifically to help protect South Africans that are unable to afford all of their debt by making their total debt more affordable and easier to repay.

When you undergo debt review, a formal repayment plan is approved based on your total debt and your current income. The new repayment plan consolidates your debt into one convenient amount that is reduced based on your affordability. Now you’ll make one simple payment each month, and your debt counsellor will distribute the payment to all of your creditors on your behalf.



Things to Consider Before Consolidating Your Debt

Before you go ahead and do anything, you need to think about your end goal. 

  • Are you looking to pay off your debts more quickly? 
  • Do you want to pay off your debt and have more disposable income?


You must have a clear goal in mind before you take action. Consider your needs and your options. Think about how much you can realistically afford to pay back and which form of debt consolidation will have the best long-term result.

For most consumers in South Africa, debt consolidation is merely a quick fix. And thus, in many cases, it might not support your long-term goal of getting out of debt. 

In fact, it can actually cause more harm than good in the long run unless you’re extremely careful and manage to take control of the loan repayment on your own.

Debt review is a better option for anyone that would like to escape their debt permanently and want the assurance of a regimented plan and support along the way.

With the help of a debt counsellor, you can enjoy peace of mind knowing that your debt is consolidated in alignment with a repayment plan that is drawn up to your specific needs.



Get the Help You Need with Debt Restruct on Your Side

There are many reasons why people are struggling with their debt. Some people are struggling to make their payments due to high interest rates, while others are simply unable to afford the payments. 

If you are struggling with your debt and looking for an affordable way to get out of debt, you should consider debt review. Consolidating your debt can make it much easier to repay, manage, and cope with your debt. While a debt consolidation loan might simply be changing who you owe. 

If you’d like to see if you qualify for debt review, then try our quick online assessment. Our team is standing by to help, or to tell you more.

Do you know whether you qualify?

Find out if you’re eligible to reduce your debt and protect your belongings.

Disclaimer: This website and any information herein is not intended to be, nor does it constitute, financial, tax, legal, investment, credit, or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified professional directly.

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