Managing multiple loans can become a financial headache. It also sometimes means paying multiple transaction fees which could be more than if the loans were consolidated.
Neil Thompson, Head of Product at African Bank, says if your goal is to get a solid financial footing in 2018 or simply to manage multiple payments more effectively and efficiently then you may want to consider a consolidation loan. “Consolidation loans are especially helpful if you want to simplify your credit by settling other debt and turning several loan payments into one cost-effective payment,” he says.
One of the biggest benefits is that instead of having several creditors all with different credit agreements – all with their own terms, monthly fees and interest rates – debt consolidation bundles these payments into one monthly repayment, often lowering the total monthly repayment (cost of credit) and reducing the monthly service fees to the consumer. “Loan consolidation can also help you prevent the nasty credit damage which can come with missed credit card payments and defaulted accounts.”
Thompson says when looking to consolidate debt, you need to be clear as to what you are looking to achieve from a consolidation. “Ultimately a consolidation loan should result in you consolidating your multiple monthly instalments into one monthly instalment that is lower than the combined payments. Banks offering consolidation loan options should be able to tell you whether you qualify for a consolidation loan, and also let you know what the monthly instalment benefit will be if you choose to consolidate the various loans identified in the application process.”
He adds that it is not advisable to consider a consolidated loan when you are at the end of term of an existing loan, as the cost of consolidating may well then be more expensive. “Remember that a consolidation loan should be used to settle debt which will result in one monthly instalment that is lower than the combined payments, and less monthly service fees and transactional debit orders costs being paid.”
So, the question is – would you qualify for a consolidation loan? Thompson says qualifying depends on whether you can afford the loan, your credit profile and the bank’s in-house risk assessment criteria. The bank also takes compliance and regulatory rules into account.
“The bank will need to understand whether you can afford the monthly instalment for the consolidation loan. The compliance and regulatory rules relate to who the bank can and can’t lend to i.e. customers in debt counselling can’t be granted new credit. The affordability regulations require that a specific affordability assessment is done and
requires the Credit Provider to ensure the settlement has been done,” he explains.
He points out that you will need to bring your proof of residence, ID, your latest original pay slip and your latest bank statement reflecting three months of salary deposits in order to apply for a consolidation loan. “We offer an easy and convenient consolidation process – no settlement quote is required and we provide proof of payment that your loans have been settled.”
“With expert guidance, determination and discipline, debt consolidation loans are a financial lifeboat that could help you pave the way to a healthier financial future. Or simply help you tidy up your financial commitments. If you are disciplined and you’re determined to sensibly manage your debt, a consolidation loan may be the answer for you,” he concludes.
8 good reasons for considering a consolidation loan?
1. Simplify multiple debts with one consolidation loan
2. Reduce the monthly fees on up to 5 loans, with one monthly fee on one consolidation loan
3. One lower instalment on up to 5 loans with repayment terms up to 72 months
4. Lock interest on your loans with a fixed interest rate on your consolidation loan
5. Improve your cash flow with one lower repayment on up to 5 loans
6. An easy and convenient consolidation process – no settlement quote is required. Proof of payment that your loans has been settled (this benefit is unique to African Bank)
7. Choose your break on your qualifying consolidation and for one month, take a break on your repayment (this benefit is unique to African Bank)
8. Peace of mind that your consolidation loan is covered with credit life insurance