Debt is a surprisingly common problem that many South Africans face in their lives. Over ten million individuals in the country have to carry the financial weight of owing money in some way or form.
While there is good debt, where your overall financial standing will be improved, unfortunately, the more common cases are ‘bad debt’ which will ultimately cost a person more money in the long-term.
What are the types of debt?
The process of borrowing money can look completely different from one agreement to the next.
The main types of debt include:
Any debt that is backed by an asset as collateral is considered secure. The collateral is included in the agreement in case you cannot repay back the loan.
An example of secured debt would be attached to the loan to buy a car if the dealer places a lien or claim of ownership on the vehicle’s title. If you fail to pay back the lender, your car can be repossessed and sold to recoup the funds.
Unsecured debt, on the other hand, does not have any assets put down as collateral. In this case, the lender does not rely on a claim of ownership because they expect that you will be able to repay the loan back in time. A contract is put in place so that, if it comes to it, the lender is able to sue to reclaim the money which is owed.
The most common example of this kind of debt comes in the form of credit cards. Revolving debt allows a consumer to borrow a limited amount of money on a regular basis, such as a monthly maximum limit.
Home loans stand as the largest debt that consumers have to face. Mortgages are usually large loans which have the real estate put up as collateral.
Debt is more than just finance-related
When you think of debt, you might think of only the financial weight it carries. However, it is heavier than just that. Debt has an affect on a person’s emotional state and the stress often has physical ramifications too.
If you are one of those individuals struggling with debt, you might know how difficult it is to resolve. Getting on top of your finances before having to take the final step of bankruptcy might seem impossible, but with the right help, it might not need to get there.
What is loan consolidation?
Debt consolidation, also known as a loan consolidation is large loan which you might take out to pay off several smaller debts. The major objective in loan consolidation is to reduce the cost of the monthly instalments and to pay off credit which might get in the way of having a good credit score.
The advantages of a loan consolidation
- It’s a more convenient method of making loan payments, as it requires only one payment monthly rather than multiple ones.
- It offers the possibility of lower interest rates, which can reduce the total amount you need to pay back.
- It enhances your credit rating which offers you more opportunity to apply for credit with lower interest rates.
What is personal finance review?
We are dedicated to helping you find your financial freedom again. That’s why we are offering you a way to stop credit from creeping in to become large amounts of debt.
As part of our Personal Finance Rescue, we will work with you to draw you up your own budget after conducting a formal review of all of your finances. This will be a way to help you save money quickly, greatly improving your long-term financial stability.
Our services also offer negotiations on your behalf with your credit providers in order to lower the amount that you pay every month.
Personal Financial Rescue also saves you from bankruptcy and insolvency by offering financial advice, budgeting education, and a method of working through your funds so that they can work better for you.