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If you’re a South African who’s struggling to keep up with your debt repayments, you can get help by applying for debt review. This process is regulated by the National Credit Act and has helped many people overcome their financial woes.
While you’re under debt review, your creditors cannot contact you and you’ll have a “debt review” flag on your credit report.
What is debt review?
Debt review, also known as debt counselling, is a legal process that helps South African consumers who are struggling to repay their loans. Debt counsellors will negotiate with your creditors to reduce your instalments and interest rates to make your payments more manageable, while still allowing you to meet your monthly expenses.
Once your application for debt review is successful, your debt counsellor will work with you to create a debt management plan that details how you intend to settle your debts. Once this is completed, you will start making payments to a payment distribution agent (PDA), who will distribute your money to your creditors until you have settled your debt.
During the debt review process, you are prohibited from taking on any new credit. This is because your debt counsellor will need to factor in the additional repayments you would have to make towards your existing debts. Furthermore, new debts could impact your credit score negatively and affect your ability to pay your current debt obligations.
While it is possible to apply for a loan while under debt review, it is important to proceed with caution nifty credit loans and financial prudence. Only apply for a personal loan when you are confident that you will be able to repay it, and make sure to pay your debts on time to maintain a healthy credit profile.
How does debt review work?
During the debt review process, a qualified debt counsellor will assess your financial situation and determine how much you can afford to pay towards your debt each month. They will account for your income, all expenses and then calculate how much is owed to each creditor. They will then work with you to come up with a rearranged payment plan that will be mutually beneficial for both parties.
While you’re under debt review, your assets are protected and you can expect to see a reduction in your monthly repayments. This means you’ll have more money to pay your other bills each month, helping you get out of debt faster.
The National Credit Act created the formal debt review process in order to help South African consumers who are over-indebted. It helps them to manage their debt better by balancing their monthly debt cost with their income, preventing additional credit from being granted, and ensuring that the process is governed via a registered debt counsellor. Hundreds of thousands of South Africans have used this service to break free from debilitating debt stress.
Debt review is a long-term solution, typically lasting from 3 – 5 years. During this time, you’ll be able to pay off most of your debt and you’ll be one step closer to becoming debt-free. However, your low repayments will mean that your creditors aren’t going to see any big payments and they may take a while to collect on what is owed to them.
Can I get a loan while under debt review?
While you are under debt review you cannot take on any new credit (with the exception of a home loan or bond) until all your existing debt is paid off. This is due to the National Credit Act which stipulates that you can only be lent money to pay off debts you can afford. Once you have entered into debt review the National Credit Regulator will notify all credit bureaux that you are under debt review and this will protect you from creditors harassing you or repossessing assets.
During the debt review process, your debt counsellor will work out a restructured repayment plan with your creditors that will result in reduced monthly payments and lower interest rates. This will enable you to repay your debt faster and be on your way to becoming debt-free.
The amount of time you will remain under debt review will depend on your unique situation. However, in general most clients are debt-free within 3-5 years and receive a clearance certificate to exit debt review.
Many people become over-indebted for a variety of reasons, some avoidable and others unavoidable such as being retrenched, having children, getting divorced, gambling addiction and health issues. Whatever the reason, it is important to remember that you can always seek help and there are many companies who specialise in assisting debt review clients burdened with loans. One of these companies is Real Estate Assist, which offers a unique and comprehensive solution for South African debt review clients who are facing the threat of foreclosure or eviction.
Can I lose my assets while under debt review?
If you default on your debts, the courts can order that your assets be sold to meet your outstanding balance. In addition, a garnishee order can be imposed, which will see money deducted from your salary. This will impact on your ability to float financially and is not something you want.
Fortunately, there are ways to stop this happening. The first step is to contact your debt counsellor as soon as you realise you are struggling and ask them for assistance. They will assess your situation and if you qualify, they will negotiate with your creditors to settle your debts for less than you currently owe.
They will also arrange to have one monthly payment withdrawn from your bank account each month and split this amongst your creditors according to the amounts they are owed. They will provide you with proof of payments each month to send to your creditors and to the debt review court.