Consolidating debt extends the pain

ADVICE: Theunis Kruger, head of Unsecured Lending at Standard Bank, says most South Africans’ salaries are spent on servicing debt.


Kruger said, “When times are tough and budgets are stretched, people begin thinking about consolidating debt and stretching out the repayment time. The immediate concern is being able to survive financially by getting those monthly payments to shrink as quickly as possible.

“But, although relief may be immediate and you are able to breathe again, there are things to think about before consolidating debt and committing yourself to a longer period of debt payments.”

He added that it becomes a no-win situation for many people when unexpected expenses come along and destroy what little spending money was left over after monthly commitments were met.

“Typically you can categorise debts into short- and long-term. Short-term debts include credit card debt, personal loans and store cards. A long-term debt would be a home loan, where repayments stretch over 20 or even 30 years.

“It is when the two are placed into the same ‘payment pot’ when consolidating debt that things can become much more expensive than most people realise.

“The main objective becomes seeing monthly commitments being consolidated into a single manageable payment, but the implications of long repayment periods on personal cash flow are not fully considered,” Kruger said.

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Masego Seemela

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