Student loans, car loans, credit card bills… You spend so much money paying off your debt each month, that often there’s nothing left for you. Trust me, you’re not alone. There is, however, a solution. To get out of debt, a debt consolidation loan can be a helpful tool. You might ask yourself ‘what is a consolidation loan and how does it work’. We unpack it all for you in this blog and show you how these types of loans can be of value to you.
What is debt consolidation?
Debt consolidation means combining all your debts into one easy-to-manage amount. This process means applying for a consolidation loan, which you will then use to turn several payments into one – often with a lower interest rate and new terms of agreement. If you’re having trouble making ends meet every month and you’re looking for solutions on how to get out of debt fast, a debt consolidation loan can work for you. This will however require discipline and commitment in order to make the process work for you.
Benefits of a debt consolidation loan
There are many benefits to applying for a debt consolidation loan. It’s the smart move when it comes to paying off multiple debts and you can save some money too. But there’s more…
- 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: Living to pay off debt is no way to live. A debt 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.
Things to remember
While debt consolidation can be an effective way to get control of your debt, there are a couple of things to remember.
- Consolidation loans generally don’t include secured loans, like car financing. It will include credit card debt, store accounts, personal loans etc.
- You need to ensure that you stop using the credit accounts that you’ve taken out a consolidation loan for. This is to make sure you don’t end up with even bigger debt than you faced before the debt consolidation loan.
Ready to apply for an African Bank Consolidation Loan? It’s quick and easy to apply for an African Bank Consolidation Loan and you can upload your documents through our website. Click here to get started. These are the documents you’ll need:
- Identity document
- Latest payslip
- Latest bank statement reflecting three salary deposits