When you’re feeling overwhelmed by debt, it’s natural to look for solutions that will give you breathing room and a clear path forward. In South Africa, two of the most common options are Debt Review (also known as Debt Counselling) and Debt Consolidation Loans. While they both aim to simplify your financial life, they work very differently and come with their own advantages and risks.
Let’s unpack the differences, so you can make the best decision for your situation.
What is Debt Review?
Debt Review is a legal process regulated by the National Credit Regulator (NCR). Meerkat is an NCR-registered debt counsellor and service provider.
Here’s how it works:
- A debt counsellor assesses your income, expenses, and debts.
- They negotiate with your creditors to reduce interest rates and/or extend repayment terms.
- All your debt repayments are combined into one affordable monthly payment via a Payment Distribution Agency (PDA).
- Once you’ve repaid your debts under the plan, you’re issued a clearance certificate, confirming that you’re debt-free.
Debt Review is designed for people who are over-indebted and need both affordability and legal protection from creditors.
👉 Learn more: What is Debt Review?
What is a Debt Consolidation Loan?
A debt consolidation loan is when you borrow one new loan, usually from a bank or lender and use it to pay off several smaller debts, such as credit cards or store accounts. Instead of juggling multiple repayments, you’re left with one loan to repay.
The idea is to simplify things and potentially lower your monthly repayment if you can secure a better interest rate or stretch the repayment term. But it’s important to remember:
- You still owe the full principal plus interest of the new loan.
- If the loan comes with high interest or a very long term, you may end up paying more over time.
Key Differences Between Debt Review and Consolidation Loans
|
Feature |
Debt Review (via Meerkat) |
Debt Consolidation Loan |
|
Legal protection |
Once your plan is made a court order, creditors can’t take legal action or repossess assets while you’re in good standing. |
No special protection beyond what any loan offers. Miss payments, and you risk default or legal action. |
|
Impact on assets |
Protected from repossession if you comply with the plan. |
If the loan is secured, your assets could be at risk. |
|
Interest rates & fees |
Counsellors negotiate lower interest rates and affordable terms. |
Rates depend on your credit score; they may include new fees and higher lifetime costs. |
|
Qualification |
Designed for people who are already over-indebted. |
You must meet lender criteria and have a good credit score and affordability. |
|
Monthly payments |
Reduced and tailored to your affordability. |
It could be reduced, but often by stretching the term, which increases long-term costs. |
|
Credit record impact |
Being under debt review shows on your credit profile until you complete the process. |
A new loan creates a credit enquiry; repayments can improve your record over time if you pay on time. |
|
Long-term cost |
Often saves money by reducing interest and avoiding arrears. |
It could cost more if the new interest rate is high or the loan term is long. |
- Choose Debt Review if:
- You’re already over-indebted (more than half your income going to debts, missed payments, creditor pressure).
- You want legal protection and a structured, regulated process.
- You need a payment that’s matched to what you can realistically afford.
- Choose a Debt Consolidation Loan if:
- Your debts are manageable, and you still have a good credit record.
- You qualify for a lower interest rate than your current debts.
- You’re disciplined and won’t fall back into using other credit facilities after consolidation.
Possible Downsides to Consider
Debt Review downsides:
- Your credit record reflects you’re under review until completion.
- It can take several years, depending on the size of your debt.
- There are regulated fees.
Debt Consolidation downsides:
- Longer terms may mean much higher total interest.
- If you don’t close old credit accounts, you may end up with more debt.
- Not everyone qualifies; interest may be high if your risk is high.
So, What’s “Better”?
There’s no single “best” option; it depends on your situation. Ask yourself:
- How much debt do I have, and how many accounts?
- What interest rates am I currently paying?
- Is more than half of my income already going to debts?
- Do I qualify for a loan at a favourable rate?
- Do I need immediate legal protection from creditors?
- Can I commit to avoiding new debt?
In Summary
- If you’re over-indebted, struggling to cope, and worried about creditor pressure, then Debt Review through Meerkat is usually the safer, more sustainable route.
- If your debts are manageable, you have good credit, and you can secure a consolidation loan at a favourable rate, then consolidation could simplify your life and even help you pay off faster.
At Meerkat, we’re here to help South Africans do more with their money, not just get out of debt, but build lasting financial wellness.
