Debt counselling, also known as debt review, is a legal process and debt relief method in South Africa that was introduced by The National Credit Act (NCA). It’s for over-indebted South Africans who are struggling to pay all their debts.
It’s a great idea for anyone whose income can’t keep up with their monthly debt obligations and the cost of living expenses.
Read: How do you know if you’re over-indebted? Take our quiz!
Moku tip: Before agreeing to sign up with any debt review company, check that they are registered on the National Credit Regulator’s website.
Meerkat’s CEO and Founder, David O’Brien is a registered Debt Counsellor with the NCR. You can confirm this here.
For a complete list of all registered Debt Counsellors in South Africa, follow this link.
When you apply for debt counselling in South Africa, you should be issued with form 16.
2. After filling out this form, you will then undergo a financial assessment with a Debt Counsellor. They will determine whether or not you are over-indebted.
This is done by looking at your income and your different monthly expenses that you provided the Debt Counsellor with.
3. If you are found to be over-indebted, a Debt Counsellor will work out a repayment plan for you that prioritises not only paying off your debt, but having enough for day-to-day living expenses too. Say goodbye to sleepless nights because of debt.
4. This repayment plan will then be passed over to lawyers to ensure that you have a court order in place regarding the repayment plan.With Meerkat, you aren’t alone. We will guide you every step of the way, even after you’ve signed up for debt counselling. Personalised, friendly support is what we specialise in.
Meerkat counselling review
During this time, your creditors will also be contacted to negotiate lower interest rates on your loans. This negotiation can end up saving you money in the long-run because a higher interest rate can mean a bigger capital debt amount.
Your creditors are also then given the new repayment plan so they are fully aware of the new payment arrangements.
5. You make a single, reduced monthly payment for ALL of your debts. This money is distributed to all of your creditors by a registered Payment Distribution Agency (PDA).
6. Once you have paid all your debts, you will be issued with a Debt Review Clearance Certificate and the credit bureaus will be informed that you have successfully completed the process. They will then remove the debt review flag from your profile.
Read: What is a debt review clearance certificate?
Debt counselling does not negatively affect your credit score. In fact, it’s a way of rehabilitating your credit score. By undergoing debt review, you show that you can consistently make your debt repayments on time. This is beneficial for your credit score.
A simple look at your credit report will reveal if you are under debt review or not. If you are, there will be a debt review flag on your credit report. The image below will give you an idea of what this could look like:
⇢ You can get a free credit report here!
The Dlomo family is a married couple with two children that signed up for the debt counselling process at Meerkat.
They approached Meerkat with a total debt amount of R591 157 and a monthly installment of R41 000.
Meerkat was able to successfully reduce their monthly debt installment to R18 000, saving them R23 000.
One of our expert Debt Counsellors was able to negotiate with their creditors and get their average interest rate on their loans from 36% to a new interest rate of 8%, saving them money on their total debt amount.
Read: A young family went from over-indebted to debt-free thanks to Meerkat
A common disadvantage that frightens many people is that undergoing debt counselling means that you won’t be able to apply for more loans while you’re undergoing the process.
This means that if you apply for a loan while under debt review, a credit lender will check you credit report and you will immediately be denied because of the debt review flag on your credit report.
The reason for this is simple: you cannot get out of debt by creating more debt. While a loan will provide short-term relief because you can pay for whatever it is you really need to pay for, it just adds to your debt burden.
The reality is, if you cannot afford to pay all your debts and if you cannot afford to buy essential items like electricity and groceries, more debt (a loan) will only drive you into further debt.
Not having access to credit for a short period is scary, but permanently being stuck in a crippling debt cycle is even scarier.
Once you have successfully completed the debt review process, you will be able to buy a house after. It’s important, however, to note that after debt review you will have to start working on building your credit score again.
Think of debt review (debt counselling) as an opportunity to wipe your credit record clean. It’s a clean slate and an opportunity for you to get back on track.
To buy a house, you will have to slowly take out a small amount of credit and show that you can consistently pay for this account. For a home, a good idea is to show that, for a year, you can consistently make these payments.
The consumer (you) pay the debt counselling fees. What’s really beneficial for you is that these fees are all regulated. This means that a registered Debt Counsellor or debt counselling company cannot charge you more than the prescribed fees set out by the National Credit Regulator (NCR).
Your monthly repayment for the first two months is usually the equivalent to your debt counselling fees. This monthly repayment will be based on your current financial situation, including your total debt amount and income, as well as the time it will take to complete the entire process.
See the image below for an outline of fees, and what you can expect before signing up for debt counselling at Meerkat. A reminder that these fees are aligned with the guidelines put forward by The National Credit Regulator.
To leave the debt review process, you need a debt review clearance certificate. The only individual who can issue a debt review clearance certificate, is a registered Debt Counsellor.
Meerkat can assist you with the administration of this debt review clearance certificate. You must, however, have paid up all your debts, or the debts that you haven’t paid, must have prescribed. If you’ve paid up all your debts, and the only debt you haven’t paid is your home loan, you also qualify for a clearance certificate.
No, you can’t. Since 2022, you cannot leave the debt counselling process early. This is even prior to being declared over-indebted. Practically this means that once you have applied for debt counselling, you cannot leave the process until you have paid all your debts, other than your home loan, in full.
This depends on how much debt you have and how much you are able to pay towards this debt each month. The longest time an individual may undergo debt counselling is 5 years.
Moku tip: Your debt counselling company should be partnered with a reputable PDA for this process to run smoothly. You should also never be paying money directly to your Debt Counsellor.