What is debt consolidation?
Struggling with multiple credit repayments? A debt consolidation loan could help you simplify your payments, understand your debt better, and even reduce the interest you pay. But it’s not suitable for everyone, and there’s lots to consider before you act.
Debt consolidation is when you move some or all of your existing debt from multiple accounts (such as credit cards and loans) to just one account. To do this you’d pay off – and potentially close – your old accounts with credit from the new one. Your debt won’t disappear, but it will all be in one place.
Here we look at what debt consolidation is, how it works, and what your options may be.
Debt consolidation refers to taking out a new loan or credit card to pay off other existing loans or credit cards. By combining multiple debts into a single, larger loan, you may also be able to obtain more favorable payoff terms, such as a lower interest rate, lower monthly payments, or both.
Here`s how to decide whether you should consolidate your debts and how to go about it if you do.
You can roll old debt into new debt in several different ways, such as by taking out a new personal loan, a new credit card with a high enough credit limit, or a home equity loan. Then, you pay off your smaller loans with the new one. If you are using a new credit card to consolidate other credit card debt, for example, you can transfer the balances on your old cards to your new one. Some balance transfer credit cards even offer incentives, such as a 0% interest rate on your balance for a period of time.
In addition to the possibility of lower interest rates and smaller monthly payments, debt consolidation can be a way to simplify your financial life, with fewer bills to pay each month and fewer due dates to worry about.
Benefits of consolidation loans
1.Easier to manage, with just one monthly payment to think about
2.Track how much you have left to repay, giving you a clearer idea of when you’ll be debt-free
3.Potentially reduce your monthly outgoings, particularly if you’re currently paying high interest rates across different debts
4.A fixed-rate loan is easier to keep track of. Simply pay the same amount on the same date every month
5.It can be quicker to pay off just one loan, and reducing your debt can help to improve your credit score
6.With us, we won’t charge you penalty fees if you want to settle your loan early or make extra payments either
* Debt consolidation loans may be beneficial where the level of interest paid is lower than that of the debts consolidated. However, while consolidation debts may help reduce the amount you pay each month, spreading the cost over a longer period may result in additional interest payments overall depending on your individual circumstances.
How can I get a loan for consolidating debt?
As with any type of credit, you’ll need to apply for the loan and meet the lender’s requirements to get it. They’ll use information from your credit report, application form, and their own records to decide whether to lend to you, and at what rate.
If you have a low credit score, you may struggle to get a good rate – or even to get approved at all. Luckily, there are several steps you may be able to take to improve your score. It’s worth looking at your Credit Score to get an idea of how lenders may see you.
What can debt consolidation loans be used for?
You can use a debt consolidation loan to pay off some or all of your existing debts. For example, if you have credit card debt, personal loan debt, an overdraft or owe money on a store card, you could take out a debt consolidation loan to pay these off. You’d then just have the debt consolidation loan to pay off rather than multiple debts.
How do debt consolidation loans work?
If you’re thinking of applying for a debt consolidation loan, first work out how much you’ll need to borrow to pay off your existing borrowing such as any loans, credit card or overdraft debt you have. Once you’ve worked out how much you’ll need, you can apply for a loan for that amount.
If you’re successful in getting the loan, you then need to use this money to pay off your debts. While you won’t have reduced the amount of borrowing you have, at least your debt will now all be in one place and hopefully easier to manage.
Once you’ve paid off your existing debt, you then need to pay back the debt consolidation loan. It’s important you make your debt consolidation loan repayments on time and in full each month. You may want to set up a Direct Debit from your bank account to the loan provider to make sure you don’t accidentally miss or are late with your monthly repayments.
Debt consolidation loans – what to be aware of
* Total cost of the loan
- Even if the new loan has a lower rate than your existing credit accounts, the amount of interest you pay overall may be more if you have the loan for a much longer time
* Impact on your credit score
- For example, applying for a loan and closing old accounts can have a negative impact on your score
Can I consolidate my debt if I have bad credit?
Even if you have a low credit score, you may be able to get a debt consolidation loan. Secured loans are usually easier to get approved for than personal loans – this is because they use an asset, such as your house or car, as collateral to reduce risk for the lender. However, you may lose the asset if you don’t keep up with your repayments, so a secured loan is not to be taken out lightly.
Advantages and disadvantages of debt consolidation loans
Consolidating your debt with a loan can have several benefits:
* Simpler budgeting
- Instead of wading through various statements and juggling multiple payments, you’ll make one set monthly payment on the same date each month
* A clearer view of your debt
- Having all your debt in one place can make it easier to see how much you owe, how quickly you’re paying it off, and how much interest you’re being charged
* Potentially lower rates
- You may be able to reduce the amount of interest you’re paying by consolidating your debt under one lower interest loan
But there can also be some disadvantages:
* If you don’t make your repayments in full and on time each month this could damage your credit score
* You may find your existing lenders charge you a fee if you end your credit arrangement with them early
* If you have a debt consolidation loan that is a secured loan, you could lose the asset this is secured against (typically your home or car) if you don’t keep up the repayments on your loan
Debt Consolidation Loans for Bad Credit
If you’re juggling a number of debts, you may want to consider checking if a debt consolidation loan might help you to manage these better. By merging various debts into one loan it may be easier for you to keep track of what you owe.
If you have experienced issues with your personal finances or making repayments in the past, you may struggled with poor credit. It is no surprise that 1 in 4 of us will experience problems with money in our lifetime, potentially leaving us with a less than perfect credit file. However, at Finsap Loans, we totally understand that life can throw unexpected issues our way, so we take all debt consolidation loans for bad credit applications into consideration.
If you are ready to get started with your application for debt consolidation loans for bad credit in South Africa, simply apply online and our team will work quickly to assist you with the application process.
What Are Consolidation Loans For Bad Credit?
Debt consolidation loans for bad credit allow customers with bad credit or blacklsted to borrow enough money to pay off their current debts and owe money to just one lender. They are specifically designed to help people who are struggling with repaying multiple debts by offering them a way to merge the debts into one figure. By consolidating their debts, borrowers may be able to work with more flexible repayment options and reduce the stress of repaying multiple credit accounts each month.
Consolidation loans for bad credit are also designed for those with poor credit history, providing them a way of paying off their debts without the worry of missing repayments and damaging their score further. You can apply with total confidence as our soft search will not affect your rating and if you maintain the repayments on your debt consolidation for bad credit, you may even see an improvement to your score.
What Are The Advantages Of Debt Consolidation Loans For Bad Credit In South Africa?
There are several benefits of debt consolidation loans for bad credit, especially if you find yourself struggling to make multiple repayments or are worried about missing repayments. This includes:
* Reducing overall repayments
– if the interest rate on your debt consolidation for bad credit loan is less than the combined interest of the previous debts, you may be able to save money each month. Rather than paying off multiple credit accounts with varying interest rates, you will have one payment per month with a single interest rate.
* Improving your monthly budget
– debt consolidation loans for bad credit in Sourh Africa allow you to merge your existing debts into one sum. This can include credit card repayments, mortgage payments, car loans, and store cards. By consolidating these debts into one figure, you will only need to pay one fee per month, making repayments easier to manage and budgeting a breeze.
* Boosting your credit rating
– you may see a boost to your credit rating if you pay off the total amount of the debt consolidation for bad credit loan in full. This will show on your credit file as a closed account with full repayment, which would be ideal for future credit applications.
* Providing peace of mind
– baring the burden of stress or worry is not good for anyone, especially when it is centred around money. By combining your debts into a manageable figure and having an achievable scheduled repayment date each month, you may find your mind is eased.
While there are several benefits to consolidation loans for bad credit, they need to be considered carefully before applying, just like any other type of credit. If you need more support or help with your financial situation, please contact us at Finsap Loans before applying for debt consolidation loans for bad credit.
What Are The Disadvantages Of Debt Consolidation Loans For Bad Credit In South Africa?
Along with the advantages of consolidation loans for bad credit, there are also several disadvantages to consider. This type of loan is not suited to everyone, so make sure you consider each con carefully and determine whether this type of loan is the right choice for you. The disadvantages include:
* Paying more overall
– while some debt consolidation loans for bad credit in South Africa may result in you paying less overall, some may result in you actually paying more. It is wise to conduct your own research to find the best interest rates and find a lender that offers a more affordable deal than what you had been paying.
* Potentially high interest rates
– this particularly applies to debt consolidation loans for bad credit with no guarantor. If you have poor credit, lenders may only offer high interest rates on their loan options. You may find secured debt consolidation loans offer better interest rates as they are secured against a high value asset, but it is worth shopping around to find the best deals.
* A non-permanent solution
– consolidating your debts does not guarantee that you will not go into debt again. To avoid falling into debt again, make yourself a realistic budget to stick to and save money where you can to build an emergency fund.
Before you apply for debt consolidation loans for bad credit in South Africa, you should review your current monthly minimum payments and the expected length of time to repay the debts. Compare this to the time associated with a debt consolidation for bad credit plan and see which is likely to be more beneficial.
Can I Get Debt Consolidation Loans For Bad Credit With No Guarantor?
This is a common question we are often asked, and we are pleased to say that we do not require a guarantor to obtain a consolidation loan. Uou do not need a third party to sign the agreement. Some loans may require a guarantor who will make your repayments if you default, but we do not need this kind of security.
With debt consolidation loans for bad credit with no guarantor, you may find that you need to secure the loan against a high value asset instead, such as your home. This means that if you miss repayments, this asset is at risk, but by securing collateral, you may receive better interest rates.
At Finsap Loans, we understand that it may not always be possible to have a guarantor, but it is recommended that you try to find someone you trust to guarantee repayments. However, if you are looking for debt consolidation loans for bad credit in South Africa with no guarantor, Finsap Loans is here to asssit.
Choose Us To Help You With Your Debt Consolidation Loans For Bad Credit
At Debt Consolidation Loans, we hold our applicants’ best interests at heart. We take a personal approach to our application process to check for affordability and to understand our customers’ needs. We consider all applications and will do everything we can to ensure you can make repayments. However, if we feel that you would struggle to make repayments, we would need to decline your application for your own wellbeing.
We aim to offer flexibility in our repayment plans, and with our good debt consolidation loans for bad credit, you will be able to make payments on a set date each month. This can help you to budget, as well as give you peace of mind when it comes to planning your finances. We are also completely transparent.
If you would like any more information about our debt consolidation loans for bad credit, please do not hesitate to contact us. If you are ready to start searching for debt consolidation loans for bad credit in South Africa, please apply now.
Debt Consolidation Loans For Bad Credit FAQs
Can I Get A Debt Consolidation Loan With Poor Credit?
Yes, you can get debt consolidation loans for bad credit from finsap Loans. We base our lending decisions on affordability and we do assist customers, even if you have poor credit history.
How Could A Debt Consolidation For Bad Credit Loan Help Me?
Consolidation loans for bad credit can offer a range of benefits if you are looking for a way to pay off multiple debts. They can help you to budget your personal finances, offer the potential to pay less overall, make repayments much more manageable, and potentially boost your credit rating if you make repayments on time.
What Should I Consider Before Applying For Debt Consolidation Loans For Bad Credit?
It is essential to ensure that your debt consolidation for bad credit agreement will not leave you in the same position for a longer period of time, so consider your affordability first. You should also check whether the amount of interest gained in your new agreement will not outweigh the savings made by switching to a consolidation loan. If you are uncertain about your future position, such as health or employment, this is something else to bear in mind before applying for debt consolidation loans for bad credit.
Can you get a loan to consolidate debts if you have a bad credit score?
If you’re already in debt, you may struggle to get a standard loan (for example, if you have a lot of debt or have missed payments). Bad credit loans can incur higher interest rates, which could contribute to the debt that you already owe to lenders.
Lenders will want to see that you can demonstrate adequate credit hygiene. They’ll usually look at a variety of factors before deciding whether to lend to you. These can include your credit score as well as other information that they hold about you, such as your income. Generally speaking, the lower your score, the higher of a risk you’ll pose to lenders, whereas the higher your score, the more likely you’ll be seen as being able to make your repayments.
Can I get free debt consolidation?
You may come across ‘free’ debt consolidation services, but these could involve hidden costs. For example, the interest charges might be higher than those charged by paid debt consolidation services.
Will getting a debt consolidation loan affect my credit score?
No, it will not affect your credit score.
The credit score that the lender uses to assess your creditworthiness is not necessarily the credit scores provided by credit reference agencies (CRAs). There is no one universal score, and different lenders and CRAs use different ways to calculate the scores that they provide.
Generally, applying for too many loans at once (debt consolidation loans in this case) could hurt your credit score. However, closing many accounts with small debts and replacing it with one consolidated loan could show that you’re managing your money more responsibly, providing you’re paying off the new loan on time.
Can I get a debt consolidation loan with poor credit history and no guarantor?
If you’re struggling, you may be able to find a guarantor who will assume responsibility if you don’t make your repayments. The stronger your credit history, the more likely a lender is to lend to you. You can try to improve your credit score before applying to give yourself a better chance of obtaining the loan.
Getting a debt consolidation loan with bad credit if you’re on a low income
Lenders use a variety of factors to assess your application. This can include your income, so if it’s low that could help to influence your ability to obtain a debt consolidation loan.
Can I get a debt consolidation loan without a credit check?
You’ll typically go through a credit check when applying for a loan. Bad credit history doesn’t always mean that you won’t get a loan, although it will make it harder than if you had a good borrowing history. If you’ve got a poor credit record, you may want to note that too many rejected applications could have an effect on your credit score.
Getting the best debt consolidation loan for you
If you’re thinking of applying for a debt consolidation loan for bad credit, there are many factors that you should consider in advance, such as budgeting and comparing rates on deals. A debt consolidation loan isn’t right for everyone. If you’re considering applying, you should apply from Finsap Loans.
To apply for a debt consolidation loan?
Apply online on our website and send the required supporting documents via email to email@example.com
1. Copy of ID or passport
2. Last 3 months bank statements or payslips
Application takes less than 5 minutes. Apply Now