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..