September 6, 2023

Consolidation Loan vs Debt Review

debt consolidation guide

If you are experiencing financial difficulties, you may have come across a consolidation loan (also known as debt consolidation). Many people confuse debt consolidation for debt review, but the two are actually entirely different processes. 

A consolidation loan is a financial arrangement in which you take out a single loan in order to pay off multiple existing debts. For some, taking on more debt to eliminate debt seems like a path to financial disaster, while others see a foolproof financial fix. Here we unpack the technicalities, pros and cons of both consolidation loans and debt review so that you can make the best choice for your finances and future…


Consolidation loans are facilitated through a single institution, such as a bank or another financial service provider. This loan can be granted in one of two ways:

  1. Once you have been deemed eligible for a consolidation loan, the lending institution will credit your bank account with the agreed-upon amount and you will directly liaise with your creditors to make your payments with this sum.
  2. You provide the lending institution with settlement letters from your creditors and they will then deal directly with your creditors to settle your debts.

Either way, you will be paying a single monthly amount to an institution, rather than making multiple payments to multiple creditors. It is essential that the lending institution provides you with a realistic and manageable payment plan so that you can meet the obligations of your loan.


  • Reduced stress and administration as you will only need to make one payment per month (you are also less likely to miss a payment)
  • Your total monthly repayment will be less than the sum of multiple repayments
  • You will only need to worry about one interest rate on a single loan, rather than multiple rates for each existing creditor  


  • Your consolidation loan is likely to have a longer term than your existing debt, meaning that you might pay more in the long run due to interest
  • Consolidation loans make more money available to you immediately – it can be incredibly difficult to manage this money effectively, especially if you are just coming out of a difficult situation. You are susceptible to falling back into the debt trap if you do not have a concrete budgeting system set in place
  • The eligibility requirements for a consolidation loan are fairly narrow, and you may not qualify


The debt review process, much like a consolidation loan, allows you to make a single, reduced monthly payment with renegotiated interest rates, rather than multiple payments to different creditors with different interest and business rates. However, the process is conducted as follows:

  1. You will fill out an assessment form to find out if you are eligible for debt review
  2. If you qualify, you will be paired with an expert NCR- registered debt counsellor (DC) who will conduct a formal review of your finances and work with you to draft a suitable monthly budget and single, reduced monthly payment amount
  3. Your DC will liaise with your creditors to create and confirm your new, affordable repayment plan
  4. You sign an affidavit and a magistrate approves your new repayment plan, after which you will be officially placed under debt review
  5. You make your payments until you are debt-free!


  • Reduced stress and administration as you will only need to make one payment per month (you are also less likely to miss a payment)
  • Your total monthly repayment will be less than the sum of multiple repayments
  • You will only need to worry about a single monthly payment that covers fees, capital and the various interest rates of your creditors, rather than multiple payments and rates for each existing creditor  
  • Your DC becomes the point of contact for all creditors, keeping you legally protected from harassment
  • Once officially placed under debt review, your assets will be legally protected from repossession, and you will be safe from being blacklisted or being declared insolvent or bankrupt


  • You will be unable to access credit as long as you are listed as under debt review 
  • You (or your spouse) will need to have proof of a stable monthly income so that your DC knows you will be able to keep up with your repayments
  • If you have defaulted on any loan payments and your creditor has already taken legal action against you, this debt will be excluded from the debt review process.

It is understandable that so many people confuse these two processes, as they do share a fair amount of pros and cons. However, while a consolidation loan may offer the same reduced monthly payment and renegotiated interest rate, it will largely leave you to deal with your situation alone, depriving you from the invaluable support and guidance of a debt counsellor. Plus, the legal protection of debt review can go a long way in securing your assets and shielding you from the stress of creditor liaison. 

While there are different strokes for different folks, our vote will always go to (drum roll…) DEBT REVIEW! This process offers you the same benefits of a consolidation loan, while providing you with the support, guidance and legal logistics necessary for you to attain a debt-free status and, most importantly, MAINTAIN it. 

It won’t be easy, but it will be 100% worth it.

Contact Debtline today. We also offer tailor-made debt solutions based on what you can afford.