January 16, 2018

Consolidation Loan Calculator and Taking Charge of Your Finances

a debt consolidation loan is used to pay off several other smaller loans to manage your debt more comfortably. this includes committing to a single loan of lower average interest with more affordable monthly repayments. the consolidation loan calculator is a useful tool to help you determine how quickly you can get out of debt, as well as other aspects such as how much interest you could potentially save.

a consolidation loan entails replacing high-interest short-term debt – such as store cards and personal loans – with a lower interest rate loan, which usually has a longer term. a typical example would be your home loan. you can apply for additional funds on your existing bond if there is positive equity in the property; simply meaning that the value of the property exceeds the current outstanding loan amount. debt consolidation basically allows you to make a fresh start by converting your various existing commitments into one, manageable, monthly loan repayment. this also saves you money on multiple fees, service charges and debit order charges on the various loans. it is administratively much simpler and less of a burden compared to the stress of being pursued by multiple creditors simultaneously.

the result of loan consolidation is that the monthly repayment will be lower on the consolidated loan compared to the combined monthly repayments of the smaller loans. this will improve your cash flow, which is the first step in the right direction and ultimately regaining control over your finances. the following example explains the concept of debt consolidation more clearly. the numbers are close approximations used to illustrate the concept of debt consolidation.

steven has a variety of debts as indicated below:

  home loan vehicle finance credit card personal loan
amount due 750 000 150 000 31 250 56 250
repayment period 240 months 60 months on-going 48 months
interest rate 9% 16% 20% 18%
monthly payment 6 747 3 650 1 250 1 650

in this specific example debt consolidation would imply that he would take a further advance on his home loan for r237 500 and use this cash amount to settle and close all the other accounts. this is simply called home loan debt consolidation and the consolidation loan calculator could be used to compute repayments and so forth. after consolidation he would have a single home loan of r987 500 and the instalment would be approximately r8 887, excluding fees, charges and insurances. his cash flow saving would be about r4 410 per month. the interest saving per month would be about r1 575 or r18 900 per year.

although debt consolidation creates immediate relief, every effort should still be made to lower the long term loan. this is because over the long term the cumulative interest and repayments will in fact be more. the best solution to this problem is to pay as much of the ‘extra’ r4 410 into your bond every month as soon as you can afford it. for example, if you were to redirect the payments you would have made on your short-term debt into your increased bond, it would enable you to pay off your entire home loan in less than 10 years, instead of 20!

for more information on debt consolidation or the computations you have completed using a consolidation loan calculator, contact approved today. whether you have determined your loan amount or require assistance from scratch we will be able to facilitate the entire application process for you.

IMPORTANT: We do not give out financial advice. We operate an online referral service and we forward on all your requests and applications to qualified licensed third parties with whom we have pre-arranged agreements. You will deal directly with these advisers. We may also receive remuneration or commissions from these third parties for referring you to them. Remember to seek independent financial and legal advice from a qualified person before entering into any binding financial transactions.
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