What is Debt Consolidation
Did you know that 86% of South Africans have borrowed money from some kind of financial institution in the last few years? Shockingly, only 23% of the country actually have money left at the end of the month in disposable income!
These shocking statistics indicate that South Africa is one of the most indebted countries in the world. People between the ages of 28 to 45 incur the most debt, some to the extent that they simply cannot afford to pay it back monthly. In fact, a study found that 38.9% of people’s salaries go toward paying off personal loans and credit cards. With this level of indebtedness, it is no wonder credit bureaus such as Transunion and Experian have such high levels of tainted credit records. A bad credit rating can result in a consumer being blacklisted and even have a Judgment taken out against them.
And the problem is simply growing.
What Has Led to this Issue?
Experts are blaming various circumstances on the high levels of debt that South African’s are finding themselves in:
- High Inflation Rates;
- Stagnating Salaries;
- Increasing Interest Rates;
- Higher Cost of Living.
People who find themselves over indebted will also turn to various other parties in order to gain some kind of credit. This is where reckless credit is at its highest and most dangerous. It is due to reckless credit that many consumers find themselves with bad credit scores and being blacklisted.
Most consumers who find themselves in debt find that it is highly embarrassing as well as personally draining. What the customer has to realize however, is that they are not alone. Marketing strategies by the large corporates and financial institutions make promises of everything you want for the lowest price. What they fail to mention, however, is how long you will actually take to pay off that “want item”.
What are the Solutions?
There are various solutions for consumers to get themselves out of a debt cycle. Should they find themselves being constantly harassed by numerous financial institutions for the monthly payments, and debt collectors looking to be paid, there are alternative options.
Debt counselling is possibly the best first step a consumer can take to getting themselves back on track financially. Seeking professional advice from debt collectors keep the debt collectors at bay, while the customer proves that they are trying to pay off the debt.
The second option is a consolidation loan. Although taking out another loan sounds counteractive, it could be the most efficient as well as most affordable way of getting on top of the debt. Debt consolidation simply means consolidating all of your debt into one solid amount. This means one interest rate, one term and one fixed amount monthly. To consolidate it together in one, could mean a lower monthly installment.
This means, less phone calls from debt collectors, less risk of being blacklisted and one amount going off the account every month.
A debt consolidation loan could be the solution for many cash-strapped South Africa. In this time of high uncertainty and ever-increasing costs, paying less for one loan could mean financial stability in a shorter period of time.
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