Debt review, often known as financial counselling, is a debt solution aimed for over-indebted South Africans who are having trouble managing their money.
To prevent customers from being placed into personal administration and having to deal with the long-term consequences, the National Credit Act (NCA) established the statutory debt rehabilitation program, debt review.
The procedure was also put in place to ensure that debt counselors adhere to strict and ethical rules when supporting customers in regaining their financial stability.
A debt counsellor examines a client’s outstanding debt and implements a revised debt repayment plan during a debt review. This will be accomplished by renegotiating interest rates with loan providers in order to lower them and by extending the debt repayment terms.
A debt counsellor will create a new monthly budget and payment plan that will offer the client with the necessary parameters and financial resources.
Furthermore, the debt review procedure requires the client to pay only one monthly debt repayment to a payment distribution agency, which will subsequently pay all of the customer’s creditors. This relieves the stress of having to keep track of and pay off various debts.
Most crucially, clients are legally protected by the National Credit Act (NCA) while under debt review, and creditors are no longer permitted to harass them.
Our debt counsellors go above and above by not only examining the client’s situation, but also teaching them how to budget and manage their finances so that they can spend appropriately and make their debt review payments on time.
Consumers in South Africa who are categorised as over-indebted will be eligible for debt review, a feasible debt solution. It is, nevertheless, necessary for customers to be employed and earning a living.
Is Debt Review a good idea?
Debt review is not a strategy to escape paying debt; rather, it is a method for paying off what you owe in a sustainable manner. Those who abandon the process also don’t like the fact that they won’t be able to receive new credit until they’ve paid off what they already owe. Only after that will they be able to utilize credit again.
What happens when you are under debt review?
Debt review is a formal debt rehabilitation program that aims to assist consumers who are truly suffering to make ends meet financially.
If you’re facing a debt review, it implies you’ve hired a debt counsellor who has determined that you’re over-indebted and in need of a repayment plan.
The debt counselor will interact directly with your credit issuers in order to negotiate lower interest rates and repayment arrangements.
You will be able to begin paying down your debt in agreed-upon installments after your payment plan is finalized and approved.
How long does it take to be cleared after debt review?
Your credit report is a record of how well you pay your bills. It keeps track of all your accounts and shows you where you’ve missed payments or gone into arrears during the last two years. After two years, the negative information simply vanishes.
What are the pros and cons of debt review?
If you are over-indebted, a debt counsellor can work with your creditors to negotiate lower interest rates and monthly payments on your behalf. This makes your debt more manageable and teaches you accountability because if you skip a payment, your agreement with your debt counsellor will be voided.
Debt counselling cons
- Because you’re paying lower sums each month, your debts may take longer to pay off.
It’s critical to obtain a credit report in order to determine how poor your credit score is. This might help you decide if you need the services of a debt counselor or whether you can improve your credit score on your own.
Who qualifies for debt review?
If you’re having trouble making ends meet month after month, debt review may be the best solution for you. Your debt counselor will work with your creditors to negotiate lower interest rates and longer payment arrangements so that you can pay off your debt while still covering your daily costs.
You will not be eligible for a debt review if neither you nor your spouse are employed. To qualify, you must have a consistent monthly income that allows you to make a reasonable offer to your creditors. If you’re unemployed, there are a variety of options that could be advantageous to you.
You will not be eligible for debt review if a debt counselor concludes that you are not over-indebted. If this is the case, you will receive a rejection letter detailing why you were refused.
Can I pay my creditors directly while under debt review?
Is it necessary for me to continue paying my creditors directly while my debt is being reviewed? You will no longer be able to pay your credit card companies directly.
Can you go to jail for debt?
Not being able to satisfy payment responsibilities can cause anxiety and stress, but in most situations, you will not be sentenced to prison if you are unable to repay your debts.
You cannot be jailed or imprisoned just because you owe money on a credit card or a student loan. However, if you haven’t paid your taxes or child support, you may have cause for concern.
Can I go to jail for debt in South Africa?
Whether you will go to jail for not paying a loan depends on the type of loan you have. You could go to jail if you refuse to pay your taxes or child support, for example. The reason for this is that failing to pay your taxes or child support is a federal misdemeanor known as contempt of court. While you could be sentenced to up to six months in prison, you may also be required to pay fines such as attorney fees and court costs.
Some loans, however, are considered to as “civil” obligations, and you cannot be jailed for them. For example, you cannot be imprisoned for not paying a hospital bill, a student loan, or a credit card payment.
Every consumer must understand their restrictions based on the operations of debt collectors that have been discussed thus far in light of the rules that regulate their activities. You can also report any loan collection agency that harasses or intimidates you to the state attorney general’s office, the Federal Trade Commission, the Consumer Financial Protection Bureau, or even the Council for Debt Collectors.
Is it true that after 7 years your credit is clear?
Even though loans remain on your credit report after seven years, having them removed can help your credit score. Only negative information on your credit record is removed after seven years. Positive accounts that have been open for a long time will remain on your credit record eternally.
Can I rent a house if I am under debt review?
In a nutshell, you can. Clients can still rent property during the debt review process because it is not a credit arrangement. Your debt counsellor can offer proof of budget and allowance for the rent amount to your landlord or rental agent, which most agents accept.
Can I buy a house after debt review?
Before you can comprehend what you can do once the debt counselling process is through, you must first understand what happens during the process and why you can’t take on new credit while in debt counselling.
This is done to ensure that the client does not take on any additional debt. The debt counseling procedure is used to help clients improve their financial status, and taking on more credit will be detrimental to their financial recovery.
As a result, your clients have paid off all of their debts under debt review; you are now free to borrow credit again and can buy a house, automobile, and so on.
It is critical, however, that when you have attended debt counseling and have resolved your financial condition, you do not hurry into taking on further debt. Some people find the process of exiting debt counseling intimidating because they are afraid of re-entering debt, while others hurry right back into the credit process.
It can be difficult to get by on a daily basis without going into debt, especially with the rising cost of living. Sticking to a monthly budget and reviewing it on a regular basis is critical, as is focusing on saving and investing to grow your money.
Does being on debt review affect employment?
No, attending Debt Review should not influence a potential employer’s choice to hire you because it demonstrates that you have taken control of your debt problem.
