Debt Review

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

Debt review is a formal process that aims to help consumers who are struggling with debt to restructure their payments and become debt-free. This legal process is regulated by the National Credit Act, which ensures that you’re treated fairly and that your rights are protected.

When you apply for debt review, a counsellor assesses your financial situation. They’ll negotiate with your creditors on your behalf to lower your monthly payments. This can result in a more affordable and manageable payment plan, and you can finally get on the road to financial recovery.

What is debt review?

Debt review is a formal legal process designed to assist South African consumers who are struggling with debt. A debt counsellor assesses your financial situation and negotiates your debt. Once the process of restructuring your debts is complete, you’ll have a new, more manageable payment plan.

Debt review is a powerful tool if you’re struggling to keep up with your debt payments. It’ll allow you to make your debt more affordable and manageable. This can provide much-needed relief if you’re struggling to make ends meet.

The pros and cons of debt counselling: What you need to know

Advantages of debt review

• It can help lower your monthly debt payments to a more manageable amount, making it easier to keep up with your debt obligations.
• When you enter into debt review, your creditors are legally prohibited from taking legal action against you, provided that you make the payments agreed upon in your plan.
• Debt counsellors can negotiate with creditors to reduce the interest rates on your debt, which can help you pay off your debts faster and save you money in the long run.
• All of your debts will be consolidated into one affordable monthly payment, simplifying your finances and making it easier to budget.
• Debt counsellors are trained professionals who can provide you with the guidance and support you need to get back on track financially.

Disadvantages of debt review

• While it can lower your monthly payments, it can also extend the amount of time it takes to pay off your debts, resulting in more interest paid over time.
• It can have a negative impact on your credit score, making it harder to obtain credit in the future.
• While under debt review, you’re not allowed to take on new credit until the process is complete, which can limit your financial options.
• If you’re unable to keep up with your debt review payments, your creditors may be able to repossess your assets as collateral.
• Debt counselling fees can be costly, and the fees are added to your debt review plan, increasing the amount of debt you owe.

Do you qualify for debt counselling?

To apply for debt counselling in South Africa, you must meet certain eligibility criteria and provide the required documentation. In this section, we'll explore these criteria in detail before discussing the step-by-step process that you’ll follow while under debt counselling.

What debts will be included?

Debts that can be included in debt review encompass a wide range of financial obligations, such as credit card debt, personal loans, store accounts, vehicle finance, home loans, overdrafts, student loans, medical bills, tax debts, and even garnishee orders.

To be eligible for debt review in South Africa, you must:

• Be a South African citizen or permanent resident
• Be over-indebted and unable to meet your monthly debt obligations
• Have a consistent income that can cover your basic living expenses and debt review payment plan
• Have credit agreements regulated by the National Credit Act
• Not have applied for debt review within the past year or have legal action taken against you by creditors

Documents to have on hand if you want to apply

• Your South African ID book or Smart ID card
• Your latest payslip and proof of income (if self-employed)
• A list of all your monthly expenses, including rent, utilities, and groceries
• Proof of your monthly debt repayments, including credit cards, loans, and store accounts
• Bank statements for the last three to six months
• Any legal documents related to your debt, such as summonses or judgements

Getting it right: How to choose a debt counselling agency

Choosing a debt counselling agency is an important step in the process. It’s essential to choose a reputable and registered company. This is so you can ensure that the process will be handled correctly and professionally. You must do your research and compare different options. Look for reviews and testimonials from previous clients, and ensure that the agency is registered with the National Credit Regulator (NCR).

How long does debt review last?

On average, the process can take between three to five years to complete. Debt review is a serious financial commitment and should not be entered into lightly. It's important to take the time to carefully consider your financial situation and explore all available options before applying.

It's also worth noting that while it can help alleviate financial stress, it may also have an impact on your credit score and ability to access credit in the future. Before committing yourself speak to a qualified debt counsellor who can provide you with tailored advice and guidance on the process.

What happens to your credit while you're under debt review?

Your credit report will reflect that you're under debt review. This means that your credit score will be negatively affected, as you'll be seen as a higher-risk borrower. While you're under debt counselling, you won't be able to apply for any new credit or take on any new debt.

However, once you've completed the process and all your debts have been paid off, your credit score will gradually improve over time. It's important to stay committed to your plan and make all your monthly payments on time to improve your creditworthiness.

What to expect during debt review: The step-by-step process

1. Apply for debt review with the help of a registered debt counsellor who will assess your financial situation and determine your eligibility.
2. Your creditors will be notified of your application, preventing them from taking legal action during the process.
3. The agency will assess your financial situation, including your income, expenses, and debt obligations, to determine an affordable payment plan for you.
4. Your debt counsellor will negotiate with your creditors to lower your monthly payments and interest rates on your behalf.
5. If your creditors do not accept the proposed payment plan, your debt counsellor can make an application to the court for a debt review order.
6. Once an agreement is reached between your debt counsellor and creditors, you’ll enter into a new payment plan that consolidates all your debts into a single manageable monthly payment.
7. You’ll be required to make your debt review payment on time every month, with your debt counsellor distributing the payment to your creditors on your behalf.

South Africa’s top 3 debt review agencies

1. DebtBusters: DebtBusters is one of the largest debt review companies in South Africa, established in 2007. With a team of experienced debt counsellors, they offer a range of debt solutions to help clients get back on track financially.
2. Debt Rescue: Founded in 2008, Debt Rescue is a prominent company. They provide a range of debt relief services, including debt review, debt consolidation, and debt counselling.
3. National Debt Advisors: National Debt Advisors (NDA) provides debt counselling and debt review services to clients across the country. Established in 2013, NDA has grown rapidly and has become one of the leading companies in the country.

While these three companies are some of the largest agencies that offer debt review in South Africa, it's important to note that size does not always reflect the quality of service. It’s best to review multiple agencies and debt counsellors to find the one that you feel confident will serve your best interests.