Individuals who are in danger of becoming over-indebted have the option of going under debt review or, alternatively, taking out loans. Debt consolidation loans can save you time and effort, as well as saving you money on interest, by allowing you to combine all your repayments into one loan.

Thus, you no longer have to pay off a number of loans with different fees, interest rates and terms, but instead take out one loan with one creditor and only pay one reduced monthly fee.

On the other hand, going under debt review can also have a very positive outcome and is less risky, as your debt counsellor will negotiate lower rates for you with your credit providers. Furthermore, debt review will also save you the trouble of having to pay off a number of loans, as you will only have to pay one instalment to the payment distribution agency monthly.

Should you choose to take out a loan, instead of going under debt review, you must first ensure that the loan:

Allows you to pay off all your debts
Reduces your total interest rate
Reduces your monthly repayments to a reasonable % of your income
Includes credit life insurance at no additional cost that covers you should you die, become disabled or be retrenched
Fees, such as bond registration costs, don’t detract from the interest rate advantage
Is affordable, so you don’t struggle to cover your living expenses for the next three to five years
Is only used to settle your debts and does not cause you to rack up more debt