What is a Debt Consolidation Loan?

Debt Consolidation Loans are used to pay off several smaller loans by merging them into one large loan. This leaves you with only one creditor to pay all your debts to, and often at a lower interest rate. Debt consolidation is a method of refinancing for those who are dealing with overwhelming debt as it allows you to combine any form of debt, from retail store debt to Short-Term Personal Loans and even credit card debt.

 

How does debt consolidation work?

You can consolidate your debt in two ways. As with any regular loan, you first have to meet the eligibility requirements for the consolidation. Once approved, you must give your bank a list of the various debts that you’d like to settle. Your bank account will then be credited with the required amount and you are able to settle the various debts yourself. Other financial institutions take a slightly different route, whereby you provide them with settlement letters from your existing creditors. The institution will settle your debts with the creditors directly after organising a repayment plan with you. While these plans don’t rid you of your debt, they may make it far easier to manage repayments.

If you’re looking for a loan in order to better manage your multiple debts, compare Personal Loans from various providers on Hippo.co.za today.