First decide whether consolidation is actually the right tool

Consolidation is most useful when you can still afford your debts but want fewer debit orders, a more manageable instalment or better pricing. It is still a new credit agreement and therefore requires an affordability assessment.

If you are already missing repayments and cannot cover normal living costs after paying debt, applying for another loan may not solve the underlying problem. In that situation, debt counselling may be more appropriate.

What can usually be consolidated?

There is no universal South African list. Lenders decide which accounts their consolidation products accept.

• Personal loans: these are commonly included in consolidation products.
• Short-term or unsecured loans: they may be included where the new provider accepts them and the affordability test is passed.
• Credit cards and store accounts: some consolidation solutions can settle them, while others exclude revolving credit.
• Overdrafts: eligibility depends on the product.
• Vehicle and home finance: secured debt needs separate consideration because the asset is tied to the agreement.

A useful example is Standard Bank's current Loan Consolidation product. It can combine up to three fixed-term personal loans from selected providers, including external lenders. Its standard product does not directly consolidate credit cards, overdrafts or revolving loans.

A real South African consolidation example

Standard Bank currently lists a minimum monthly income of R3,000, a monthly service fee of R69 and no initiation fee for this specific consolidation product. The loans selected for consolidation must meet the bank's eligibility rules and the application remains subject to affordability and credit assessment.

Why the monthly payment can fall while the total cost rises

Before accepting an offer, compare your current outstanding balances with the new loan's total cost of credit. Do not compare only the old monthly debit orders with the new monthly instalment.

Example

Will consolidation reduce monthly service fees?

It can. Under the National Credit Act framework, service fees on credit agreements are regulated. The prescribed maximum monthly service fee is R60 before VAT, which is commonly R69 including VAT.

If you replace several qualifying loan accounts with one new loan, you may stop paying separate service fees on the accounts that are actually settled. But do not assume that every account disappears: confirm that each old loan has been settled and closed where applicable.

What to collect before applying

You need exact settlement figures, not rough balances from a banking app. Ask each credit provider for a settlement amount or settlement letter.

1. List every debt and the current monthly instalment.
2. Obtain current settlement balances from the accounts you want to close.
3. Record the interest rate, remaining term and service fee on each account.
4. Check whether any account is already in arrears or under legal collection.
5. Calculate how much money remains after rent or bond payments, food, transport, utilities, insurance and other essential expenses.

Documents vary by lender. Capitec currently lists an original ID, latest salary slip and, where salary is not paid into a Capitec account, a bank statement showing the latest three consecutive salary deposits for its Personal Loan application.

You do not need a “perfect” credit score

There is no NCA rule saying your credit report must be completely clean before you may apply. What matters is whether the lender's credit and affordability assessment supports the new loan.

In practice, serious arrears can make ordinary consolidation difficult. Standard Bank, for example, states that loans used in its standard consolidation product must be up to date. If you have already missed payments or are about to do so, it directs customers towards its debt-care options instead.

Debt consolidation and debt review are not the same thing

How debt review actually works

Debt counselling is intended for consumers who are over-indebted. A registered debt counsellor assesses income, essential expenses and credit obligations and can prepare a proposal to rearrange repayments.

Under the National Credit Act, a Magistrate's Court can make an order rearranging obligations after considering the consumer's financial position and the proposal. Debt review is therefore more than simply “combining debit orders”.

NCR guidance also confirms that consumers can make a single payment through a registered Payment Distribution Agent. The PDA distributes the money to credit providers. The debt counsellor should not personally collect and distribute these repayment funds.

Which route fits your situation?

Before signing the new loan

Ask for the pre-agreement statement and quotation and check the interest rate, service fee, insurance, number of instalments and total amount payable. The NCR's prescribed quotation format is designed to show these costs before you commit.

Also confirm in writing which existing debts will be settled directly by the new lender. Standard Bank, for example, states that it manages the settlement payment process for eligible loans in its consolidation product.

Expert view: the target is not one debit order — it is a better debt position

FAQ about debt consolidation in South Africa

Article author

Sipho Dlamini

Personal Finance Content Editor

Sipho Dlamini is the editorial byline used for CreditNice content covering personal credit, debt management and borrowing decisions in South Africa. The profile image is illustrative.