Five debts, five debit orders and one expensive month

Illustrative case study. This is not an actual client. Individual circumstances and credit eligibility differ.

The situation

Naledi has five unsecured debts. She is employed and has not yet fallen seriously behind, but her repayments leave the rest of the month extremely tight.

Could consolidation help?

Potentially. A genuine consolidation arrangement normally involves obtaining new credit that settles multiple existing debts. Instead of managing five different payments, Naledi could theoretically have one new repayment.

If a hypothetical consolidation option reduced her payment from R8 350 to R6 400 per month, that would create about R1 950 in monthly cash-flow relief. That looks attractive, but it is not enough information on its own.

What must still be checked?

• How long the new repayment term will be.
• What interest rate and fees will apply.
• What she will repay in total.
• Whether all old accounts will be settled.
• Whether she can realistically afford the new payment.

A lower monthly payment achieved by stretching the debt over a much longer period could cost more overall.

When consolidation becomes harder

If Naledi had already missed multiple repayments and her credit profile had deteriorated, obtaining another affordable loan may become significantly harder. At that point, the question changes from where to get one loan to whether all existing obligations are still affordable.

The important lesson

Debt consolidation can be useful for the right consumer. Debt counselling can be appropriate for a different financial situation. The decision should start with affordability, not only the desire to have one monthly payment.