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A South
African consumers are swimming in a
sea of debt. Currently consumer
credit to households is estimated at
R760bn with 14 million active credit
consumers and 50 million open
accounts. The average % of debt to
income is 73%. There are 80,000
judgments for debt per month.
Making the minimum payment on all
your credit cards, mortgage and
personal loans will not cut it. The
compounding of interest (interest on
interest) is working against you and
some day, you will find yourself in
a big financial hole if you do not
do something about it
Therefore consumers are turning to
debt consolidation loans, attracted
by the benefits and advantages these
loans have to offer. Lets discuss
some of the possible advantages of a
debt consolidation
Single Payment
Most consumers prefers to make a
single payment instead of having to
make payments to several creditors.
This way, you can do away with the
damaging effects of dealing with
unmanageable debts. A debt
consolidation loan will help you
bring your entire debts under one
umbrella. Keeping track of your
money will not be difficult.
Interest Rate Reduction
A major benefit of debt
consolidation loans are due to the
fact that the interest rates are
half to one-third the interest
charged for revolving credit card
accounts. Debt consolidation loans
are secured loans - meaning your
home is used as collateral while
borrowing money. This reduction in
interest rate turns out to be a
blessing for consumers.
Monthly Admin Fees Savings
By consolidating your debt, you are
not only saving on the overall
interest rate, but you are also
saving on all your monthly charges
for all your separate account. This
can be substantial if you take into
account all the monthly
administration charges for your
bond, overdraft, loan, car
repayments etc.
Low Monthly Payments
You eliminate all your high interest
debt when you consolidate your debt.
You will now be making a low monthly
payment on your debt consolidation
loan and this is the only loan you
need to worry and pay off.
However, before jumping into debt
consolidation loans, you should do
some calculations first on the
interest you are paying on your
current credit card and personal
loan accounts and then check how
much you will be saving by getting a
debt consolidation loan. Next you
should plan to use these savings
(interest) to pay off your debt
consolidation loan as soon as
possible, to maximize savings.
Tax Free Investment
The best investment you can make is
to repay high interest debt. The
return on this investment will be in
excess of 20% on credit card debt,
for example, and that return is tax
free. Fund managers who have
achieved the same rate of return for
their clients the past year are very
few and far between..
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