Personal loans can be used for any purpose, including consumption, and reduce the borrower's available income until the loan is repaid.

Consolidation loans are used to pay off one or more high-interest debt obligations. The loan is provided on more advantageous terms (terms and interest), which increases the borrower's available income.

Many borrowers find that the simplicity of switching from several expenses to a single monthly payment is sufficient justification for considering a debt consolidation loan. Budgeting can be made simpler by a personal loan's fixed monthly amount, which contrasts with the variable balances and minimal payments on credit card bills.

However, the amount of money you can save on interest fees is the main advantage of a debt consolidation loan.

Your credit ratings may increase, which is another advantage of debt consolidation.

Credit cards, shop cards, school loans, and personal loans that are unsecured and may or may not be current; court orders that haven't yet been collected on using a garnishment or attachment orders.

Consumers can qualify for a consolidation loan even if their accounts are past due or subject to a debt review. In terms of Section 88(1) of the National Credit Act 34 of 2005, “a consumer who has filed an application in terms of Section 86 (1), or who has alleged in court that the consumer is over-indebted, must not incur any further charges under a credit facility, or enter into any further credit agreement, other than a consolidation agreement, with any credit provider.”

Section 88(4) of the National Credit Act of 2005 also states that “If a credit provider enters into a credit agreement, other than a consolidation agreement contemplated in this section, with a consumer who has applied for a debt re-arrangement and that re-arrangement still subsists, all or part of that new credit agreement may be declared to be reckless credit, whether or not the circumstances set out in section 80 apply.”

A credit report is data that credit bureaus keep about your credit history and payment patterns. It contains details you offer credit grantors while completing a credit application form, like your name, address, employer, and ID number.

Credit reporting agencies also keep records of your account history and payment patterns, including whether you make regular and timely payments on time. A credit report does not include information about a person's race, religion, political affiliations, or past medical conditions.

Credit bureaus are crucial to the economy because they enable 18 million South African consumers to use credit instead of having to save up the full amount before making a purchase.

To reduce their risk and enable credit extension, credit/service providers rely on credit bureaus. By giving credit to customers they can trust, this also helps shops and banks keep the cost of items low.

If a consumer owes money to a creditor or provider of services but hasn't made the payments, the court will issue a judgment against them. A judgment is public information and is kept on your credit record for five years, up to the time it is fully paid, or the judgment is revoked by the court. Consumer is no longer required to petition the court to vacate the ruling.

When you break the terms of your credit agreement with a retailer or bank, that is, when you fail to make payments on your account, the store or bank will supply negative information about you to credit bureaus.

Depending on how the default was described, a default stays on your credit record for two or one years. Consumer defaults continue to be classified subjectively for a year. Consumer default classification that results in enforcement action, such a credit card being suspended or cancelled or a repossession, stays on your credit record for longer than two years.

Once the default has been fully paid, the default data will be deleted. Lenders have seven days after the default is settled to update their records and report the paid-up status to credit reporting agencies. After receiving the lender's notification, the bureaus have seven days to update your credit record.

When you undergo debt review, you are deemed overindebted and marked as a debt review client by the credit bureaus. As debt review seeks to assist you in paying off existing debt, this stops you from obtaining new credit.

An official clearance certificate will be issued by a debt counselor once the debt review procedure is finished. By doing this, you can have your credit score reset to 0 and the debt review flag withdrawn from your updated credit report.

Since debt counseling is a formal and controlled process, it can only be definitively concluded through the legal system, just like any other court matter. Your debt counselor has seven days to send your clearance certificate to the credit bureaus so that your record is cleared once you have paid off all your debt, applied for, and received your clearance certificate.

Additionally, the credit reporting agencies themselves have seven days to remove the debt review listing from your file and update that your debt review case has been resolved. Therefore, the entire procedure ought to be finished in roughly 21 days.