Debt Counselling vs Debt Consolidation in South Africa
Compare debt counselling and debt consolidation: qualification, credit impact, costs, repayment structure and risks.
The difference in one minute
| Debt consolidation | Debt counselling | |
|---|---|---|
| What it is | New credit used to settle selected debts | A formal over-indebtedness process |
| Who it suits | People who may still qualify for affordable credit | People who cannot keep up with obligations |
| New credit | Possible if approved | Generally not allowed while under counselling |
| Handled by | A credit provider | A registered debt counsellor and legal process |
How consolidation works
A consolidation loan replaces several balances with one new agreement. It can simplify repayments and may reduce the monthly amount, but the full cost depends on interest, fees and term. A lower monthly instalment can still cost more if the term is much longer.
How debt counselling works
Debt counselling starts with an assessment of whether your debt is sustainable. If you are found over-indebted, a registered debt counsellor may propose restructured repayments through the required process.
When consolidation may make sense
- You are not under debt counselling.
- You have reliable income and can pass affordability checks.
- The new total cost is acceptable, not only the monthly instalment.
When debt counselling may deserve consideration
- You repeatedly cannot meet minimum payments.
- You are borrowing to pay basic living costs.
- Arrears and legal notices are becoming part of the picture.
Be careful when an advert says “consolidation” but actually describes debt counselling. Both may be useful in the right circumstances, but they are not the same thing.
If you are unsure which route fits your numbers, start the assessment and a Financial Assessor can review the next step.