Debt consolidation loans compared
Written byFinmart Editorial Team
What to compare before you apply
| Loans | Loan amount | Loan term | Interest rate | Age |
|---|---|---|---|---|
 Dengoo | R500 – R350,000 | 1 – 365 days | 3.65% – 58.4% p.a. | |
 Arcadia Finance | R100 – R350,000 | 3 – 72 months | Up to 28% APR | 18+ |
 Creditum | R500 – R350,000 | 6 – 72 months | 11% – 28% p.a. | 18+ |
 FatCat Loans | R1,000 – R350,000 | Up to 72 months | ||
 MyLoan | R500 – R500,000 | 6 – 72 months | 11% – 28% p.a. |
Calculate your new monthly instalment
What is a debt consolidation loan?
A debt consolidation loan is a personal loan that you use to pay off several existing debts — store cards, credit cards, short-term loans or an overdraft. Afterwards you have a single instalment to one lender instead of several payments on different dates.
It is new credit: you have to qualify for it like any other loan, and the lender checks your credit record and whether you can afford the new instalment.
How consolidation works
- List every debt with its outstanding balance, interest rate, monthly instalment and remaining term.
- Compare consolidation offers for the total amount and ask for quotes over different terms.
- Compare the total amount repayable of each offer with what you would pay by keeping your current debts.
- After approval, settle the old debts — some lenders pay them directly — and ask for paid-up letters.
- Close the accounts you no longer need and repay the new loan by debit order.
A worked example: lower instalment, higher total cost
Suppose you owe R25,000 on three accounts (instalments calculated on the remaining balances, excluding account fees):
| Debt | Balance | Rate | Remaining term | Instalment |
|---|---|---|---|---|
| Personal loan | R12,000 | 27.75% | 18 months | R822.59 |
| Credit card | R8,000 | 21% | 24 months | R411.09 |
| Store card | R5,000 | 21% | 24 months | R256.93 |
| Total | R25,000 | R1,490.60 |
Repaying these debts as planned costs R30,838.85 in total. Now compare a consolidation loan of R25,000 at 24% a year, with a financed initiation fee of R1,207.50 and a service fee of R69 per month:
| Consolidation term | Monthly instalment | Total repaid | Compared with current debts |
|---|---|---|---|
| 24 months | R1,454.62 | R34,910.86 | R35.98 less per month, R4,072.01 more in total |
| 36 months | R1,097.19 | R39,499.02 | R393.41 less per month, R8,660.17 more in total |
| 48 months | R923.41 | R44,323.81 | R567.19 less per month, R13,484.96 more in total |
The instalment drops, but the fees and the longer term make the loan more expensive overall. Consolidation saves money only if the new interest rate is well below the rates you pay now, or if your current debts carry high account fees that disappear once they are closed.
When consolidation makes sense
| Consolidation can help when… | Think twice when… |
|---|---|
| The new rate is clearly lower than your average rate | You would pay the same or a higher rate |
| Several due dates make it hard to pay on time | The lower instalment comes only from a much longer term |
| You close the paid-off accounts | You plan to keep using the store and credit cards |
| Your income is stable and the new instalment fits your budget | You are already missing payments on several accounts |
Requirements for a consolidation loan
- Be 18 or older (a few lenders set the minimum at 21)
- Have a valid South African ID; some lenders also accept permanent residents
- Earn a regular income that is paid into your own bank account
- Have a South African bank account and a cell phone number
- Pass the lender’s credit check and affordability assessment
Because consolidation loans are larger, lenders usually expect a stable employment history and a credit record without recent defaults. A list of your current debts with settlement amounts speeds up the application.
Consolidation loan, debt review or debt counselling?
| Consolidation loan | Debt review | |
|---|---|---|
| What it is | A new loan that settles existing debts | A legal process under section 86 of the National Credit Act |
| Who arranges it | You, with a lender | An NCR-registered debt counsellor |
| Requirement | You qualify for new credit | You are over-indebted |
| Effect on instalments | One instalment, set by the loan term | Creditors agree to or a court orders reduced instalments |
| Credit record | Normal credit record, new account | Debt review flag; no new credit until the process ends |
| Cost | Interest and loan fees | Debt counselling and legal fees |
If you can no longer afford your current instalments, a consolidation loan is unlikely to be approved — and would add to the problem. In that case, speak to a registered debt counsellor.
How consolidation affects your credit record
The application creates a credit enquiry, and the new loan appears as a new account. In the short term this can lower your score slightly. Over time, paying one instalment on time every month and having fewer open accounts with balances usually has a positive effect — as long as you do not run up the old accounts again.
Tips to stay debt-free after consolidating
- Close the store and credit card accounts you have paid off, or at least lower their limits
- Set up the new debit order for the day after your salary is paid
- Build a small emergency fund so that the next unexpected cost does not go on credit
- Check your credit report once a year — it is free from each bureau
- Settle the consolidation loan early when you can to save interest
Which debts can you consolidate?
| Debt | Usually a good candidate? | Why |
|---|---|---|
| Store cards and clothing accounts | Yes | High rates and monthly fees on small balances |
| Credit cards | Often | Worth it if the new rate is lower and you close or limit the card |
| Short-term loans | Yes | Short-term credit is among the most expensive forms of borrowing |
| Personal loans | Sometimes | Only if the new rate is clearly lower |
| Home loan or vehicle finance | Rarely | Secured debt is usually cheaper than an unsecured consolidation loan |
Interest rates and fees on consolidation loans
A consolidation loan is priced like any unsecured personal loan: interest up to about 28% a year in 2026, an initiation fee of up to R1,207.50 including VAT, a service fee of up to R69 per month and often credit life insurance for terms over 6 months. Borrowers with a good credit record are frequently offered rates well below the maximum — and that difference decides whether consolidation saves money.
| Cost | Short-term credit (up to R8,000, up to 6 months) | Unsecured credit (personal loans) |
|---|---|---|
| Interest | 5% per month on the first loan, 3% per month on further loans in the same calendar year | Linked to the repo rate (repo + 21 percentage points), about 28% a year in 2026 |
| Initiation fee | R165 plus 10% of the amount above R1,000, never more than R1,050 plus VAT | R165 plus 10% of the amount above R1,000, never more than R1,050 plus VAT |
| Monthly service fee | Up to R60 plus VAT (R69) | Up to R60 plus VAT (R69) |
| Credit life insurance | Usually not required | Can be required for terms over 6 months; you may use your own policy |
Frequently asked questions about consolidation loans
Will a consolidation loan improve my credit score?
It can, over time, if you repay the new loan on time and do not open new accounts. Right after consolidation, the new enquiry and the new account may lower your score slightly.
Can I consolidate my debt if I am blacklisted?
South Africa has no single blacklist, but negative listings and judgments make approval much harder. If you are behind on several accounts, debt review is usually more realistic than a new loan.
Does a longer term always save money?
No. A longer term lowers the monthly instalment but increases the interest and the number of service fees you pay. Compare the total amount repayable before you decide.
Can I consolidate short-term loans?
Yes, a personal loan can settle short-term loans. Because short-term credit is expensive, this can save money if you qualify for a personal loan rate well below 5% per month.
Can I get a consolidation loan while under debt review?
Generally no. Registered lenders do not grant new credit while a debt review flag is on your record.