When expenses begin to outweigh income, it’s easy to fall into a state of financial instability and this can be very daunting. As an over-indebted customer, it is important to understand that while your situation may appear grim during this stressful time, there is help available.
Improving your credit record can bring a huge sense of relief. When you enter debt counselling creditors will be put on hold and your credit profile will start improving. Remember that your credit record is regarded as your financial reputation and a damaging financial reputation can jeopardise ‘credit movement’ such as taking out a cell phone contract or applying for a mortgage loan to secure funds in purchasing a new home etc.
Debt counselling is a great opportunity to start off fresh, with the condition that your credit conduct is in order and you don’t go back to your bad spending habits.
So what is debt counselling?
Debt counselling is a regulated process whereby a debt counsellor negotiates, on your behalf, with all your creditors, to have the term of each credit agreement extended and the instalments reduced. Our experienced debt counsellors will also appeal to your creditors to reduce the interest rate/s on your credit agreements so that you can afford to pay off all your debt as soon as possible.
What do the financial experts say?
According to financial experts, debt counselling is preferably for individuals who have difficulty making minimum bill payments.
*Absa Bank’s CRO: Debt Review and Customer Forbearance: Peter Mphahlele, National Manager; Muhammed Laher, and Head of Debt Review Customer Collections; Tej Desai all agreed that first and foremost, you will be expected to notify the bank and seek help the moment you realise that you may not be able to meet your payment obligations. People tend to wait until the very last moment, but our advisors stress the importance of early assistance.
If I get approved, then what’s the next step?
From there, it becomes a regulated process, where our debt counsellor will investigate your financial situation and income/expenditure ratio in order to determine if you are over-indebted and whether you have fallen victim to reckless lending – an act which can be taken to court.
If our debt counsellor determines that you aren’t in a position to fulfil your financial obligations, you will receive assistance in negotiating more favourable terms with your credit providers, allowing a smaller repayment over a longer term.
During this time, you will be expected to undergo a complete budget overhaul, removing expenses that do not directly serve your rehabilitation purposes. Don’t panic though our debt counsellor will be able to assist you by offering advice and budgeting aid.
Mphahlele emphasised the importance of customers being close to the process to ensure it’s finalised within 60 business days and also to ensure the new debt repayment terms are achievable and fully aligns with their debt rehabilitation journey. If this does not happen, customers will default again because of a mismatch between future income and new repayment terms.
“It’s vital that this is seen as a temporary solution for easing immediate financial strain. Ultimately, the aim is to become credit active again, free from bad debt.” Desai added.
Debt Counselling, in a nutshell…
- When you are in debt counselling, creditors cannot take action against you.
- There is no permanent record of having undergone debt counselling.
- There is only one REDUCED monthly repayment to be made.
- Your budget will ensure you meet your basic needs first before provision is made for debts.
- You will never pay more money than you can reasonably afford.
- A debt counsellor will suggest ways of cutting costs and saving money.
- You will no longer get calls from your creditors demanding payment.
If you have any additional queries about debt counselling, contact us or call 021 003 4535
*Reference article: https://blog.absa.co.za/debt-counselling-journey/