Debt Review

Restoring financial stability: How debt review in South Africa can help

When your debit orders hit your account and there’s almost nothing left for rent, food or petrol, it can feel like there’s no way out. Debt review is one of the tools South Africans can use to get back on their feet. It’s a formal legal process under the National Credit Act (NCA) that helps you reorganise what you already owe into one affordable monthly payment, with a registered debt counsellor negotiating on your behalf.

Instead of trying to juggle credit cards, store accounts and loans with different due dates and interest rates, you work with a counsellor who looks at your whole situation and helps you put a proper plan in place. Recent figures from the South African Reserve Bank show that household debt now sits at just over 62% of disposable income, which explains why so many families feel as if there’s very little room left in the budget. If the plan is accepted by your creditors, or confirmed by a court, you pay one agreed instalment every month and, as long as you stick to it, your creditors generally can’t take legal action on those debts.

What is debt review?

Debt review (also called debt counselling) is there for people who are over-indebted – in other words, when you simply cannot keep up with all your monthly repayments and still cover basic expenses. It is not another loan. You are not borrowing new money.

A counsellor looks at your income, your household expenses and every credit agreement in your name. If they see that your current instalments are not realistic, they’ll work out a new, reduced repayment plan and send it to your creditors. The idea is to give you a single, lower monthly payment that you can actually afford, instead of chasing your tail every month.

For many people, the biggest relief is psychological: the phone calls and threats calm down, there is a clear plan, and you know exactly what you need to pay and when.

The Pros and Cons of going under debt review

Debt review can feel like a lifeline when you’re drowning in debt, but it does change your financial life for a few years, so it’s important to understand both sides.

On the positive side, your monthly payments become manageable again. Because the counsellor restructures your instalments and negotiates lower interest rates where possible, you can often free up money for essentials like groceries, transport and school fees. Your creditors are officially notified that you’re under review, and as long as you pay according to the new plan, they generally can’t carry on with legal action on those accounts.

You also move from many payments to just one. That makes it much easier to budget and to see progress as your balances slowly come down. And you’re not doing this alone: you have a professional dealing with your creditors, explaining your rights and keeping the process on track.

There are trade-offs. Because your instalments are reduced, it usually takes longer to pay off your debt. That can mean you pay more total interest over the full period, even if the interest rates themselves have been lowered. While you’re under debt review, a flag sits on your credit report. Most banks and credit providers will see you as high risk and won’t give you new credit, and legally you are not allowed to take on any new loans or credit cards until the process is finished.

If you stop paying the agreed instalment, things can turn serious again. Creditors can go back to enforcing the original agreements, and if the debt is secured – like a car or house – they can eventually ask the court to repossess it. Debt counselling fees are also built into your repayment plan. These fees are regulated by the NCA and spread out, but they still form part of what you repay.

Who is debt review meant for?

Debt review is not meant for a once-off cash-flow problem, like a single bad month. It’s aimed at people whose debts have become unmanageable on an ongoing basis. If, after paying rent, transport, food, school fees and other basics, there is simply not enough left to cover all your instalments, you may be over-indebted.

To be a suitable candidate, you must be a South African citizen or permanent resident with some form of regular income. Your debts should be credit agreements regulated by the National Credit Act – things like personal loans, credit cards, store accounts, vehicle finance, home loans and overdrafts. You must be unable to meet your current instalments, but still able to commit to a reduced, consolidated payment once your budget has been adjusted.

Most everyday debts can be included: credit cards, personal loans, clothing and furniture accounts, arrears on car and home finance, overdrafts, and in some cases medical and tax debts and garnishee (emolument attachment) orders. Debts that fall outside the NCA, or accounts that are already far down a legal path, might need to be treated differently. A counsellor should explain exactly what can and cannot be pulled into the process in your specific case.

What you’ll need when you apply

When you’re ready to speak to a debt counsellor, it helps to have your paperwork together. They will usually ask for your South African ID book or Smart ID card, your most recent payslip or other proof of income, and bank statements for the last three to six months.

You’ll also need a list of your monthly living expenses – rent or bond, electricity, water, transport, food, school fees, insurance and so on – and a list of every debt, with the current balance and instalment. If you have received any summonses or judgments, those legal documents should be included as well. The more honest and detailed you are, the more realistic and helpful your new payment plan will be.

Choosing the right debt counsellor

You’re going to be working with this person or firm for years, so choose carefully. The first non-negotiable step is to check that they are registered with the National Credit Regulator (NCR). If they are not, walk away.

Once that box is ticked, look at reputation and fit. How long have they been operating? Do they take time to explain things properly, or do you feel rushed? Are their fees clear and written down, or are they vague when you ask questions?

It’s a good idea to talk to more than one agency before you sign anything. Debt review is a big commitment, and you want a counsellor who is honest with you, communicates clearly, and genuinely seems interested in helping you get out of debt – not just signing up another client.

How long does debt review last?

Debt review is a medium- to long-term plan, not a quick patch. For many people the process lasts between three and five years, with a lot of plans structured around 60 months. The exact length depends on how much you owe, what interest rates your creditors agree to, and how much you can realistically pay each month.

Before you commit, ask the counsellor to show you a draft of your proposed repayment plan. Look at three things: how much you’ll be paying every month, how long the plan is expected to run, and roughly how much you’ll end up paying in total. Make sure those numbers make sense for your household and that everyone in the family who has a say in the finances understands what you’re signing up for.

What happens to your credit record?

Once you are formally under debt review, this fact appears on your credit report. It tells banks and other credit providers that you are in a legal process to sort out your debts. While that flag is there, you won’t be able to open new accounts or take out fresh loans, and most lenders won’t even consider an application.

That can feel restrictive, but it’s also part of what keeps you from slipping further into trouble. The point of the process is to close the tap, deal with the existing debt properly and then start fresh.

When all the debts included in the plan are finally paid up, your counsellor issues a clearance certificate. This is sent to the credit bureaus, the debt review flag is removed, and your record is updated to show that those accounts are settled. From there, as you manage money carefully and pay any new accounts on time, your credit score can gradually recover.

What the process looks like in real life

In most cases, the journey starts with a phone call or online enquiry. You share your details, fill in an application and send through your documents. The counsellor then does a full assessment and tells you whether you are over-indebted and whether debt review is a suitable option.

If you go ahead, they notify your creditors that you’ve applied for debt review. This step is important, because it usually stops new legal action on the accounts that will be included in your plan. The counsellor then draws up a budget that leaves enough for your family to live on and uses the rest to create a single, consolidated debt repayment.

This proposed repayment plan is sent to your creditors. Sometimes they accept it as is; other times there is back-and-forth until everyone agrees. If there’s still no agreement, the counsellor can take the matter to court and ask for a debt restructuring order. Once the court signs it off, the plan becomes legally binding on all parties.

After that, your job is simple but strict: pay the agreed amount every month, on time. Usually this payment goes through a Payment Distribution Agency that splits the money and pays each creditor their share. Over time, your balances come down. Month by month, the picture improves.

When everything under review is finally paid off, you get your clearance certificate, the debt review flag is removed from your credit record, and you can start rebuilding your financial life on much stronger ground. Recent reporting, based on National Credit Regulator data, estimates that more than 10 million South Africans are already over-indebted and that around a third of the country’s nearly 28 million credit-active consumers have impaired records, which shows just how common these struggles are.

Because this is such an important step, take the time to ask questions, compare different counsellors and make sure you understand exactly how the process will affect you now and in the next few years. Debt review can’t fix past decisions, but used properly, it can give you a structured, realistic way to move forward.