African Bank consolidation and personal loans are popular with many people trying to either come to terms with or manage their debt or to secure a loan to pay for a range of things including living expenses, education and more. The Africa Bank is a well-known, reputable financial service provider that offers these and other financial products and services. You can contact them for advice, help or guidance about managing your financial situation or to find out about their range of products and services and what they can do for you.
What is debt consolidation?
Debt consolidation is when an individual will take out one loan to pay off several other debts in their name. The reason many people do this is because when they have several different accounts, loans and other debts to pay off, the interest rate between all of them can be high and it can be difficult to manage paying so many debts off at once. Taking out one bigger loan to pay all of the smaller debts off is much more convenient as there will be only one loan repayment to pay every month. Other reasons why so many people use debt consolidation is because often the one loan has a lower interest rate than all the other loans combined, thus saving the individual money. Many debt consolidation loans have a fixed interest rate, making the loan even better.
With this sort of loan, the interest rate is so low because the individual will usually have signed a large asset, like a property, as collateral so that if they are unable to afford the loan repayments, the financial service provider will take possession of the home and sell it to make back their money. The lender therefore poses a much lower risk to the financial service provider than in any other sort of loan and they drop the interest rate or offer a fixed interest rate instead.
What is a personal loan?
A personal loan is when a financial service provider gives credit to an individual without security or collateral for the individual’s personal use. The financial service provider finances the loan based on the individual’s ability to pay and integrity. Usually, for a personal loan, the financial service provider will first check two things before agreeing to finance an individual’s loan:
- They will want to see that the individual has a regular, steady income that will cover the individual’s living expenses as well as the monthly loan repayments and interest.
- The financial service provider will also want to see that the individual has a good credit record, as any history or non-payment or failure to pay the full amount or on time will make the individual a risk in the eyes of the financial service provider.
Different individuals use personal loans for a wide range of different things including education, living expenses, vets bills and more, but one of the most common uses of the personal loan is to pay off other debt. Similarly to debt consolidation, a personal loan can be used to cover several other, smaller debts, leaving the individual with the convenience of only having one loan. However, it is necessary to understand that with a personal loan the interest rate will be substantially higher than with a debt consolidation loan as there is no collateral to secure the loan.
Other ways to manage your debt
It is possible, however, to manage your debt without taking out one loan to pay it all off. You can speak to a debt counsellor at one of the many debt management firms throughout the country about your options. You should always think very carefully before you sign anything and read the fine print thoroughly. When you sign a loan, you will be, quite literally, paying for it for years to come. Be sure to make the right decision.