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Find out about debt consolidation or debt counselling on ClearScore.

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The difference between debt consolidation and debt counselling

We consider the dissimilarities of debt consolidation and debt counselling, as well as the advantages and disadvantages of each.

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Save with the right debt solution on ClearScore

Find out about debt consolidation or debt counselling on ClearScore.

See my debt options

If you’re struggling to meet your debt obligations, there are two main debt solutions you should consider: debt counselling and debt consolidation.

Although they offer the same end-result, both are designed to assist different degrees of indebtedness, and they offer different support structures.

If you have numerous debts you need to service every month, each with their own interest rate and repayment terms, you may struggle to stay on top of them all.

By consolidating your debt, or taking out a debt consolidation loan, you can combine your debt into a single monthly payment, with one interest rate and a single repayment term.

Advantages and disadvantages:

Debt consolidation entails taking out a new loan and using it to immediately settle your outstanding debt. Ideally, you will have an overall lower interest rate, and your debt will be structured more simply going forward.

The downside of debt consolidation is that you may end up with an overall longer repayment term, and you won’t have access to any legal assistance if creditors take action against you. However, you will still have access to new credit. This means you could open a store account or take out another loan.

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This option is right for you if:

You are scrambling to meet your debt obligations, and you just need a little push in the right direction. By restructuring your debt, you may be able to make ends meet more comfortably again.

Debt counselling, sometimes known as debt review, is an official debt solution which was implemented by the National Credit Act in 2007. The goal is to help over-indebted South Africans who are unable to pull themselves out of a debt trap.

If you sign up for debt counselling, you will be assigned a debt counsellor who will reach out to your creditors. They will negotiate lower interest rates and smaller repayment amounts.

Advantages and disadvantages:

The benefits of debt counselling include being able to rest assured that a debt expert will assist you with your debt, and your creditors will no longer be able to take legal action against you or contact you directly.

On the other hand, you won’t be allowed to access any new credit until the debt counselling process is concluded and your debt is settled. There will be a note on your credit report, stating that you’re under debt counselling.

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However, this will ultimately benefit you because you will no longer be tempted to take on new debt. This will allow you to focus on settling the amount you already owe.

This option is right for you if:

You are already at odds with your creditors. You would likely have been contacted by collectors, who will have warned you about the legal implications of missed payments.

If you’re unsure which option is right for you, it’s best to chat to a financial adviser or a debt counsellor about your options. In addition, you can do our free Coaching plan on how to stay on top of your debt.


Isabelle is a freelance finance writer and journalist in Cape Town. She helps make managing your personal finances calm, clear and easy to understand.