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Should you take a loan to settle other debts?
Stay on top of what you owe by simplifying your loans into a single loan.
Are you making several different debt payments every month? Credit cards, store cards, personal loans … it’s easy to accumulate several bills that need to be paid monthly. Debit orders can make this easier, but certain accounts can’t be paid by debit order. You have to make a monthly EFT to cover those, and if you forget one and pay late, you could be penalised.
Some regular account payments are only allowed by debit order – take car insurance, for example. But then you need to keep track of when your debit orders are due, and make sure there is enough money in your account to cover all of them. A rejected debit order also means penalties that add to the total cost of your debt.
An effective way to stay on top of what you owe is to simplify debts into a single loan.
A consolidation loan can help
You could, for example, take out one loan that enables you to pay off your other short-term debts and then have only one monthly payment to make.
Taking out a loan that consolidates several different debts like this could be a way to ease your monthly debt repayments. It’s worth considering this option if you want to simplify your finances. The interest rate you are offered depends on a few factors, which the bank weighs up when considering your loan application. After we have re-assessed your finances when you apply for a consolidation loan, you may find you qualify for a lower interest rate.
You will be paying admin fees on only 1 loan, instead of all the different admin fees you were paying before
You can use this calculator to see the effect of combining multiple loans into a single loan. This is a great way to see how the repayment amount differs, depending on the duration of the loan.
If, between the interest rate on your consolidation loan and the new loan term, your monthly payment turns out to be lower than the total you were paying on all your different debts, you have 2 options.
First, you could choose to continue paying the same total amount as you were paying before, not the lower monthly payment due. This would pay off your consolidation loan over a shorter period than the original term. So you’d pay less interest in total.
On the other hand, if you pay the lower monthly amount of the consolidation loan, settling your debt will take the full term. You will have more steady cashflow, but you will pay interest over the full term of the loan.
Another perk to remember is that, whatever the interest rate on your consolidation loan, you will only be paying the admin fees on one loan, instead of all the different admin fees you were paying before.
Making debt management simpler
To sum up: you could consider combining multiple loans that you have with different providers into one Nedbank loan. If your application is successful, you will be offered a single personal loan account at a fixed interest rate, with a structured repayment plan. This should help you save money each month and gain better control over your finances.
