5 Steps to Apply for a Consolidation Loan in South Africa

5 Steps to Apply for a Consolidation Loan in South Africa

When thinking about applying for a consolidation loan in South Africa there are five steps you should follow in order to make a wise decision. In this article we will walk you through these steps and other issues you need to know to help you look for a consolidation loan suitable to your needs.

Step 1: What is a Consolidation Loan and how does it Works?

A consolidation loan is a financial tool that enables you to combine different debts–such as credit card bills, student loans, car loans– into one larger debt. Usually, this new debt has a lower interest rate than the individual ones, and new terms and conditions.

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When you decide a consolidation loan is the right choice for you, you apply for this type of loan and once your application has been approved and the money has been credited to you, you pay all the other creditors and end up with only one loan. As it has already been pointed out, this loan is more manageable since you are dealing with only one creditor, and in time, you may end up paying a little less than what you would have if you kept all the other individual debts. Cash converters are financial tools for find best loans.

Step 2: What are the Requirements for a Consolidation Loan?

Banks and financial institutions that offer consolidation loans have certain requirements that you should satisfy when applying for this kind of loan. The information you will need to account for usually includes the following:

  • South African ID proving that you are over 18 years of age,

  • your latest pay slip,

  • your latest bank statement, 

  • proof of residence.

Remember that these requirements may vary from bank to bank so it is very important to check with the financial institution whether you qualify or not for a consolidation loan.

Step 3: How to Use Consolidation Loans Calculators?

When applying for a consolidation loan, it is always useful to take advantage of loans calculators so as to have a deeper understanding of how your loan will look like. Many banks and financial institutions offer this tool where you can simulate your loan and see how much you would end up paying, for instance. The way these calculators work may vary from bank to bank, but generally, you have to add the amount you wish to borrow and the number of months in which you wish to pay your loan, that is, the loan term. Bear in mind that the interest rate may vary based on different criteria, like your income and expenses.

Step 4: How to Fill out an Online Application for Consolidation Loans?

In today’s world where time is a precious commodity, being able to take a loan through an online application is a plus. Most banks and other financial institutions make available online application for consolidation loans. Usually, all you have to do is fill out their application online with your personal information, such as your name, South African ID, and contact information. When filling out your online application, remember that there are required fields that you need to enter which are usually marked with an asterisk.

Step 5: How to Apply for Safe Consolidation Loans?

Requesting a loan is no small feat, so you should go about this decision very carefully. This means two things:

  • checking the reputation of the financial institution you chose, and

  • being very disciplined with your finances.

Is the bank or loan company a trustworthy institution? Do they have good reviews? These are some questions you should ask yourself before trusting your finances to a bank or loan institution so as to keep away from fraud or being scammed.

Furthermore, although the consolidation loan turns all your loans into a larger and more manageable one, you should be very careful with how you spend once you applied for this loan. Keeping away from spending more than you earn may be a good start.

Consolidation Loans Reviews – Pros and Cons

A good way to establish if a bank or financial institution is trustworthy and reputable is reading reviews from other clients. Check on the Internet to see what people say about the bank you are about to choose.

For you to assess if this type of loan is suitable for you or not you should be aware of both its positive and negative sides. 

  • a larger, more manageable loan

  • generally lower interest rates

  • only one creditor

  • generally better terms and conditions.

The main con of this type of loan is that if you have not figured out what are the bad habits that landed you into different debts and fixed them, you may become even more indebted than before.

Is it Possible to Quote up to 500 000 for a Consolidation Loan?

The maximum amount banks offer may range from 150 000 to 350 000 South African Rand. There may be some loan companies that offer loans above that amount, but it is not advisable to turn to companies that offer such higher loans since there are no guarantees as of their reputation or truthfulness. It is enormously important that you check thoroughly if the financial institution you trust your finances to is a serious and well-known institution. 

Consolidation Loan Interest Rate Comparison

The loan interest rate will vary from bank to bank and according to your financial situation; for this reason bear in mind that the interest rate may be different depending on your specific circumstances. For instance, your salary or credit history may be a factor contributing to a lower or higher interest rate. You will get accurate information regarding specific interesting rates once you fill out your request for the loan. Once you have these details, you may be able to compare rates from different banks.

Can Consolidation loans be Used to Pay off Credit Cards?

Credit cards can be a great tool if we manage them wisely. However, sometimes we use them recklessly for different reasons. Say we lose our job and start using our credit cards for the time being with the hope that a new job is just around the corner. But then it turns out that we don’t find a job that easily, and we find ourselves in a sea of debt. Consolidation loans are a useful way for us to manage our accounts with credit cards and turn them into one larger loan payable to only one creditor.

What is the Difference between a Consolidation Loan and a Personal Loan?

A personal loan is money you borrow from a bank or other financial institution for the purpose of purchasing something, such as refurnishing your house, or buying that home theater you always wanted. With this loan you commit yourself to pay back the amount loaned in a certain period of time and at a certain interest rate. So, a consolidation loan is a type of personal loan that you ask for to pay off other bills.

Which Banks Offer Consolidation Loans in South Africa?

There are several banks that offer this kind of loan. Among them we find:

  • Absa Bank

  • African Bank

  • Nedbank

  • Standard Bank

All these banks offer consolidation loans with different interest rates and terms and conditions. Most of these banks offer consolidation loan calculators for you to have an idea of how much you would end up paying.

In this article we have gone through five steps and other details you need to take into account before applying for a consolidation loan. We’ve also reviewed some of the banks that offer this loan in South Africa. Remember that this is an important decision which requires thorough research and consideration.

Preguntas Frecuentes

Can I use a consolidation loan to pay off my student loan?

Of course you can. Consolidation loans allow you to pay off different loans; and your student loan is definitely one of them.

Up to how many debts can I consolidate?

This depends on the bank, for instance Nedbank lets you consolidate up to 3 loans, whereas African Bank allows you to consolidate up to 5 loans.

After I apply for a consolidation loan is it advisable that I continue using my credit cards?

It’s not advisable that you continue using your credit cards after you request a consolidation loan since the whole idea of this loan is for you to have a more manageable debt, and to know exactly how much you will pay each month and over what period of time.

If I apply for a consolidation loan, will I only qualify for the amount that I need to consolidate?

Of course, you will. There are several banks in South Africa that offer consolidation loans such as Absa Bank, African Bank, Nedbank and Standard Bank. They all have different terms and conditions as well as interest rates. The amount you will be able to obtain will depend on the credit analysis that the bank carries out. 

Can I apply for a consolidation loan while I'm earning only R4,000 before deduction?

It is important to check the particular eligibility criteria for a consolidation loan with the lenders in South Africa. Each institution establishes different requirements to qualify for a loan, however, it can be difficult to be eligible for a loan with a monthly income of 4,000 rand before deduction. You need to demonstrate enough affordability capacity to afford the payments.

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