Also known as, debt counselling, debt review is the South African government’s solution to over-indebtedness. It can prevent you from getting blacklisted, although it will take a long time to complete the whole process.
But what does debt review means? Is debt review even a good idea? How can it help people recover from their debt problems? Are there any disadvantages to debt review you should worry about? These are some of the questions we’ll answer in this post.
What is a Debt Review?
This debt rehabilitation program was introduced under the National Credit Act (NCA) to help people avoid being placed under the credit blacklist which has profound long-term effects. Aside from this, the NCA reinforced the guidelines that debt counsellors must follow in helping over-indebted clients.
You can go for debt counselling wherein counsellors will mediate the case between you and your lenders. They will renegotiate your loan to see how the creditor can restructure it to make repayments more affordable on your end.
You can also get help from a debt review company. They will consolidate all your debts by repaying all that pass their eligibility test. With this, you will now have to pay your debts to one company and not worry about paying different creditors.
In addition to that, you’ll get lower interest rates or monthly repayments suitable to your current ability to repay.
What happens after you finish the debt review process?
After you’re cleared of all your debts, you’ll be issued with a clearance certificate. All credit bureaus and creditors will also be notified that you’re ready to take on new loans.
Advantages and Disadvantages of Debt Counselling
Undergoing debt counselling (or consolidation) is not a panacea that will instantly alleviate you from debt. There are pros and cons of debt review that you must consider since it can affect your credit status in the long run.
But first, let’s go through its many advantages.
All your debts will be consolidated
As part of the debt consolidation process, all loans you have under different lenders will be collated into one big debt. You won’t have to worry paying different creditors with different interest rates.
Lower interest rates
Debt counsellors will renegotiate your loan terms to get a lower monthly repayment and interest rate. Your financial capacity will be heavily considered in deciding the new offer. One thing for sure is that the amount will make it easier for you to repay the loan in time.
You can’t apply for new credit
Since you’re under the debt review process, you’ll be barred from taking another loan, no matter how small it is. This will also serve as your protection that will prevent you from worsening your debt status.
Protect your assets from repossession
Rest assured that your home or your car will be protected from repossession once you get into a debt review program.
You won’t get harassed by your lender
Lawyers and debt collectors will hound you with phone calls and emails that demand you to pay your debt. The threat of being served with legal action can make many people fearful and helpless. With the help of your debt counsellor, you and your creditor can come up with a more amicable agreement.
Just because you’re in a pinch of being unable to repay your debt on time, you thought of undergoing the debt review process to save you from the trouble. Many think that this is the easiest solution to get out of debt.
However, debt counselling also has its own disadvantages to consider.
You can’t easily apply for debt counselling
You can’t just apply for debt review for the simple reason of missing out on your repayments for a few months. There’s still the possibility of rejection if they find that you’re not really over-indebted according to the NCA standards.
You can’t apply for another credit
Since you can’t apply for another credit, you can’t get leverage. This may result in missed opportunities to purchase stock shares or other investments at a cheaper price.
You have to finish the program
You can’t get out of debt review until you finish it. Most debt review plans won’t allow advance repayments or paying more than the monthly due. Usually, in return for lower interest rates, you’ll get longer loan terms which may not be favourable in the long run.
There are fees you have to pay
Don’t expect the debt review process to be free. Debt review companies are allowed to charge debt counselling fees, although there’s a limit to how much they can ask.
Debt counselling can’t cover all your loans
Debt counsellors won’t be able to stop credit providers who have already brought your case to the court. Debts that are undergoing legal proceedings won’t be included in the debt review process.
Where Can You Apply
There are many debt consolidation companies and debt counselling services you can go to in South Africa. The best debt review companies are those with a solid reputation in the industry.
Here are some of the most trusted names and programs that can be found in the country:
- National Debt Counsellors
- FNB debt counselling
- Standard bank debt review
- Nedbank debt review
- Debt Rescue
Avoid the service offered by the company called “African Debt Advisors”. They have a bad reputation that may just put you into deeper trouble.
Beware of bogus debt review companies that offer debt counselling service that’s too good to be true. Check the National Credit Regulator’s website for legitimate service providers to avoid getting tricked by these hoodlums.