Is a Consolidation Loan One of the Workable Debt Solutions?

Get stuck in the debt cycle, and pretty soon, you receive SMS messages, calls from service providers, and emails demanding immediate payment. You can tell the creditors that you do not have money right now and intend to pay as soon as you can, but they want dates and written commitments. Of course, you did make the debt and are responsible for paying it. However, what if you simply cannot and do not want the creditors to take judgments against you?

Considering that judgments stay against your name for years unless fully paid, it is better to seek solutions rather than trying to negotiate your way out of debt. Here is the truth. Unless you pay what is owed, plus the interest within the negotiated timeframe, the creditors will come knocking on your door to foreclose on your property, repossess your vehicles, and write up all the furniture in the house. Indeed, you may even find that some debt collectors arrange for the immediate removal of your furniture.

It is a scary picture, but the good news is that you cannot go to jail for debt, unless it is debt owed to SARS. The bad news is that unless you make use of one of the workable solutions, you will lose everything and still have to pay the creditors.

A debt consolidation loan may seem like one of the perfect solutions. And it can be, if the interest rate is lower than the interest rates you now pay on your credit cards, personal loans, and store accounts. It is also one of the suitable debt solutions if you can afford the monthly instalment, and take out such a loan from a trusted financial services provider.

The downside is that the amounts offered are often not enough to cover all your debt. This means you are now stuck with a fixed-term loan, must pay on the other debt, and still have the capacity to make more debt. It does not help you unless you are extremely disciplined in saving money. Indeed, it can cause you to go deeper into debt. It is a suitable solution if all your debt can be covered, and you can pay it off in a reasonable timeframe, provided you do not lose your job.


If a Debt Consolidation Loan Is Not One of The Viable Solutions for You, What Can You Do?

You can apply for voluntary sequestration in which you surrender your financial estate to the Court. You are declared bankrupt, and up to 80% of your debt is paid in full, with the remainder payable as a lump sum or at a low monthly instalment over a period not exceeding two years. You cannot make more debt unless you have the permission of the trustee, and it is thus the perfect way to stop the debt cycle in its tracks.

Get in touch if you want more information on how to apply for voluntary sequestration as one of the workable debt solutions in South Africa.


Disclaimer: This article is for informational purposes only and does not constitute legal advice. Call on our attorneys for legal advice, rather than relying on the information herein to make any decisions. The information is relevant to the date of publishing.

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