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Debt Consolidation

Debt consolidation is an act of taking out a new larger loan to pay off smaller multiple loans. The goal with debt consolidation is simply to roll all your different loans or credit card payments into one single payment. This can be at a lower or higher interest rate depending on your credit score.  Here is the deal, debt consolidation makes sense when you end up having a lower interest rate than you were paying before and shorter term.  A lower interest rate isn’t always a guarantee when you consolidate.


Before you apply for that debt consolidation loan, there are really important things you need to know. Most importantly that debt consolidation isn’t right for everyone.


  • You can’t afford the new loan payments until the loan is repaid.
  • You don’t clear all your debts with the loan instead you use the loan for something else.
  • Your new net interest rate is higher  than your current net interest rate.
  • You end up paying more in total as result of the monthly repayment being higher                   or the term of the agreement being longer.
  • It will cost you to consolidate them.  High interest rates, once-off initiation fee, monthly admin fees, service charges and more.
  • When you really need help sorting out your debts rather than taking a new loan – our debt counsellors are able to negotiate with your creditors and arrange a manageable repayment plan.
  • When the debt consolidation loan does not cater fully to your day to day cash flow needs.​​​​​​

Your behavior with money doesn’t change

Listen closely, most of the time, after someone consolidates their debt, the debt grows back. Why? They don’t have a game plan to pay cash and spend less. In other words, they haven’t established good money habits for staying out of debt and building wealth. Their behavior hasn’t changed, so it’s extremely likely they will go right back into debt.


When getting a debt consolidation loan doesn’t make sense our debt counsellors need to be negotiating with your creditors and arrange a manageable repayment plan on your behalf. Debt review allows you to benefit from:

  • Regular action plans and tips, articles shared with our clients targeting to change you behaviour with money;
  • Consolidating all your debts into one, without the need to take out one bigger loan;
  • All household expenses are covered. A debt consolidation loan usually does not cater fully to day to day cash flow needs;
  • Interest rates can be reduced as low as zero. This is highly unlikely when compared to  an unsecured debt consolidation which can attract high interest rates.

To learn more about debt counselling visit our debt counselling page.


There are two types of debt consolidation loans:

  1. Secured – where the amount you have borrowed is secured against an asset e.g your home. However, if you miss repayments, you could lose your home.
  2. Unsecured – where the loan is not secured against your home or other assets.  An example would be a personal loan.

Find out if you qualify for debt consolidation without taking a new loan.

Table below summarises facts about debt consolidtion loan vs debt review. But here’s the dealdebt consolidation promises one thing but delivers another. Here’s why you should skip debt consolidation and opt instead to follow a debt review plan that helps you actually get rid of debt fast.


Consolidates all your debts into one, with the need to take out one bigger loan Consolidates all your debts into one, without the need to take out one bigger loan
There is no legal protection of assets since there is no court order in place. If its a secured debt consolidation loan against your home you can lose your home if you miss repayments. Your assets are legally protected while under debt review in the form of a court order
The bigger loan granted to pay off the smaller loans is limited The amount of debt included under debt review is unlimited 
One of the prerequisites to qualify for the loan is having a good credit score Credit scores are not required to qualify for debt review
Makes sense when the interest rate that you pay for the consolidation loan is lower than you were paying before. Interest rates are lowered and amount of debt decreases
Lower monthly installment Lower monthly installment
Household expenses are usually not covered All household expenses are covered. The repayment plan prioritses covering all household expenses and the balance is channelled towards paying your debt

Debt consolidation doesn’t mean debt elimination

The fact that you cannot borrow while under debt review means that you are eliminating debt when you pay your debt.


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