Step 1: You apply for a consolidation loan from a bank or lender.

Step 2: The lender checks if you can afford the loan. They look at your income and credit score.

Step 3: If approved, the bank pays off your old debts for you.

Step 4: You now have only one loan to pay each month.

Step 5: You must close your credit cards and store accounts. This stops you from adding more debt.

🏦 Personal Loan (Consolidation Loan)

This is the most common option. You borrow money from a bank to pay off all your debts. The loan has a fixed interest rate and fixed monthly payments.

Best for: People with a good credit score who can afford monthly payments.

🏠 Home Loan Refinance

If you own a home, you can use its value to consolidate debts. You refinance your bond and use the extra money to pay off debts. Interest rates are lower, but you risk losing your home if you cannot pay.

Best for: Homeowners with significant equity in their property.

💳 Balance Transfer

Some credit cards offer low rates for transferring other debts. You move your balances to one card. The low rate is usually for a limited time only.

Best for: People who can pay off debt quickly before rates increase.

📋 Debt Counselling (Debt Review)

This is not a loan. A debt counsellor negotiates with your creditors to lower your payments. All debts are combined into one monthly payment. You get legal protection from creditors.

Best for: People who are too deep in debt to qualify for a loan.

Loan amount: R50,000

Interest rate: 18% per year

Loan term: 48 months (4 years)

Monthly payment: Approximately R1,467

Total you pay back: Approximately R70,416

Total interest and fees: Approximately R20,416

💡 Which should you choose? If you can afford your monthly payments and have a good credit score, try a consolidation loan first. If you are drowning in debt and cannot keep up, debt counselling may be better for you.

🚫 Never Pay Upfront Fees for a Loan

Legitimate lenders in South Africa never ask for money before approving your loan. If someone asks you to pay an “admin fee”, “processing fee”, or “insurance” before you get the loan, it is a SCAM.

🛡️ Debt Review Removal Scams

The National Credit Regulator warns about people offering to “remove” you from debt review quickly for a fee. Only a registered debt counsellor can issue a clearance certificate after you pay off your debts. Anyone else offering this is a scammer.

📞 Where to Report Scams

SAFPS Scam Hotline: 083 123 7226

National Credit Regulator: 0860 627 627

SABRIC (Banking fraud): www.sabric.co.za

SAPS: Report at your local police station

Step 1: List All Your Debts

Write down every debt you have. Include the lender name, amount owed, interest rate, and monthly payment. This helps you know exactly what you need to consolidate.

Step 2: Check Your Credit Score

Get a free credit report from a bureau like TransUnion, Experian, or XDS. You are entitled to one free report per year. Check for errors and know your score before applying.

Step 3: Compare Lenders

Look at offers from at least 3 different banks. Compare interest rates, fees, and loan terms. Use online calculators to see what your monthly payment will be.

Step 4: Gather Your Documents

Collect your ID, proof of address, payslips, and bank statements. Having everything ready speeds up the process.

Step 5: Apply to Your Chosen Lender

Apply online, by phone, or at a branch. You will need to provide your documents and agree to a credit check. Approval can take 24 hours to 7 days.

Step 6: Sign the Agreement

Read the loan agreement carefully before signing. Check the interest rate, total amount payable, and monthly payment. Ask questions if anything is unclear.

Step 7: Old Debts Get Paid

The bank will pay off your old debts directly. You will receive settlement letters confirming each account is closed.

Step 8: Close Old Accounts

Close your credit cards and store accounts to avoid new debt. Set up a debit order for your new monthly payment. Budget carefully and stay on track.

✅ Consider debt consolidation if:

• You have multiple debts that are hard to manage
• You have a good credit score (650+)
• You can afford the new monthly payment
• You are committed to not adding new debt

⚠️ Consider debt counselling instead if:

• You cannot qualify for a consolidation loan
• You are already missing payments
• Your debts are more than you can afford
• You need legal protection from creditors

Remember: Consolidation is just one tool. The most important thing is to stop adding new debt and create a budget you can stick to. If you are unsure, speak to a registered financial advisor or debt counsellor first.

Can I get a consolidation loan with bad credit?

It is difficult. Most lenders want a credit score of 650 or higher. If your credit is poor, you may need to consider debt counselling instead. Some lenders like African Bank work with people who have lower scores, but you will pay higher interest.

How long does approval take?

Most banks can approve within 24 hours to 7 days. Online applications are usually faster. If you already bank with the lender, it may be quicker.

Can I pay off my consolidation loan early?

Yes. Most lenders allow early settlement with no penalty. This can save you money on interest. Check your loan agreement to be sure.

What debts can I consolidate?

Most unsecured debts can be consolidated: credit cards, store accounts, personal loans, and payday loans. Home loans and car finance are usually excluded because they are secured debts.

Will consolidation hurt my credit score?

At first, applying for a loan may cause a small dip in your score. But if you make payments on time, your score should improve over time. Paying off old debts also helps your credit.