Get out of debt with a consolidation loan
Many South Africans battle to make ends meet. The Lockdown has not made this task any easier. With a salary that just doesn't keep up with rising costs, many have turned to loans and credit cards to make ends meet. However, if you are struggling to meet your monthly commitments, this can add to your financial worries.
Taking out another loan to change your financial situation might seem counter-productive, but a consolidation loan can work to your advantage. In this blog, we're going to take you through the ways that an African Bank Consolidation Loan can help you to take better control of your debt.
How can a Consolidation Loan help you?
Imagine this: You have three credit accounts – a credit card, a student loan and a retail credit account. That means three monthly instalments, each with a different interest rate. This is where a Consolidation Loan can be useful to you. It is a single loan that replaces these three credit accounts. So, for example, if your total debt is R50 000, you can take out a consolidation loan for that amount. This will allow you to pay off the three individual debts with a single loan, meaning one monthly instalment and one interest rate. Often, your instalment will be lower than the total you were paying for the three credit accounts.
There are many more benefits to applying for a consolidation loan. It’s the smart move when it comes to paying off multiple debts and you can save some money too:
- You save on interest
If you have multiple debts, each debt comes with its own interest rate, adding considerably to the amount you have to pay each month. However, because a consolidation loan combines all your debts into a single payment, you will only have one fixed interest rate to concern yourself with.
- Pay a lower instalment each month
A consolidation loan can help you keep up your credit payments and still have enough money left over for living expenses. For example, if you had five debts you were paying to different creditors, a consolidation loan will combine all those debts so that you only pay a single creditor. That means more money left over each month to start building up a savings buffer that will keep you from falling into bad debt in the future.
- Improves your credit score
If you're struggling to keep up with your debt repayments each month, maybe missing the odd payment here and there, your credit score will suffer. By combining all your debts into a single, lower, monthly instalment, it will be easier to make sure that your accounts are paid up each month, thus keeping your credit score healthy.
Debt consolidation can be an effective way to take control of your debt, but a change in financial habits will help you in the long run. Here are some tips to consider:
- Set up one or two financial goals.
- Implement a budget.
- Track your expenses.
- Once you have paid off existing store cards, cancel the accounts to avoid getting into the same situation again.
- Cancel your credit card and close any existing loan accounts as soon as your dues are paid.
- Use cash wherever possible.
- Start empowering yourself by reading books and blogs. Follow trusted financial gurus and those who inspire you to do better.
Taking control of your finances may be hard at first, but the lessons you learn on this incredible journey will ultimately improve your future!