Debt consolidation or debt counselling?

Consolidation uses a new loan

A consolidation loan brings existing debts into a new credit agreement. One payment may be easier to manage, but extending the term can mean paying more overall. Check settlement figures, new fees and the total repayment before deciding.

Debt counselling is a different process

The NCR describes debt counselling as a formal route for over-indebted consumers. A registered debt counsellor assesses the situation and helps work towards an affordable repayment arrangement. It does not erase the debt and it is not a free service.

Before agreeing, understand the fees, effect on your credit record, restrictions on further credit and the conditions for completing the process. Ask for everything in writing.

Compare the whole picture

Write down every current balance, monthly payment and remaining term. Then compare the cost of a proposed new loan, including insurance and fees. A lower instalment does not prove that the overall deal is cheaper.

If essential expenses and existing debt already exceed your income, a new loan may not address the underlying problem. Contact your lenders early and use the NCR’s directory to find a registered debt counsellor if needed.