What is debt review and how does it work?
If you are in a difficult financial situation, and you're struggling to pay off your debts, you may have heard about debt counselling (debt review).
Debt review or debt counselling is a debt relief measure that was introduced by the National Credit Act (NCA) as a way to help South Africans struggling to pay all their debts. It's important to understand that debt review is not a way to avoid paying your debt, it’s instead, a way of managing to pay off what you owe.
If you are over-indebted (unable to make all your debt repayments) and debt collectors are demanding payment from you, debt review can be a good thing in the long run.
How does it work?
If, after you've filled in an application form, a registered Debt Counsellor finds you to be over-indebted, a Debt Counsellor will set-up a repayment plan for you, including the amount you will pay each month and your repayment term (how long you will be under debt review for).
It's important to note that the time you spend under debt review is dependent on a few factors:
- amount of debt you have.
- the monthly instalment you are able to pay.
During the debt review process, a Debt Counsellor takes over all communication with your creditors and the credit bureaus, and you're free to just enjoy your life again without worrying about how you will pay for everything.
Get a detailed overview of the debt counselling process in this blog post.
What does it mean to be under debt review?
- Your assets, like your home and your car, are legally protected.
- Your monthly debt repayment can be reduced by up to 50%.
- Instead of paying multiple debt repayments, you are only paying one reduced repayment.
- For all your credit agreements, your creditors are contacted and your Debt Counsellor negotiates for reduced interest rates on your loans. This could end up saving you money on your total debt amount!
Is debt review a good idea?
Disadvantages of debt counselling
- One of the main debt review consequences is that you will not be able to take out credit during the debt review process. This is seen as a debt review disadvantage for people that are stuck in a debt spiral and reliant on debt to fund their everyday expenses.
But, not being able to take on more debt is actually an advantage of debt counselling because now you can give yourself a proper chance at paying off your existing debt. See this as the start of your journey to financial freedom.
- Your repayments can be extended over a longer period. In order to reduce your monthly repayment, your debt may need to be paid off over a longer period. However, there is also a negotiation with creditors on your behalf so that your interest rates on your loans can be reduced. This means you can be paying less for your debt in the long term.
- Debt review will be flagged on your credit report until the process is completed. This means that your creditors will be able to see that you are listed under debt review during the process. It does not mean you are blacklisted. In fact, when the process is complete, you will have a clean record and any negative information is removed from your credit record.
The advantages of debt counselling
You can reduce your debt repayments by up to 50% giving you breathing room each month.
- Your Debt Counsellor will negotiate with your creditors to pay less as well as reduce interest rates to reduce your overall outstanding debt.
Your assets cannot be repossessed and will be legally protected.
- Debt review is a legal process under the NCA. Creditors cannot initiate any legal action to sell your assets at auction to cover your debt. Creditors cannot proceed with legal action and continue to hassle you for payment.
All creditors are managed by your Debt Counsellor on your behalf.
- The only thing you have to pay is the ONE affordable monthly payment. We take care of your creditors on your behalf.
Sleepless nights become a thing of the past.
- You will feel relief immediately when registering for debt review as someone else is taking care of the process for you.
An opportunity at financial freedom.
- After you have undergone debt counselling, you will have a clean record and feel real financial relief. Your finances will be in order and you can enjoy a new, stress-free life—one where you can actually afford to pay your living expenses.
A chance to apply for new credit after debt review.
- You will NOT have a permanent record of debt review on your credit report and banks will not discriminate if you've successfully completed the process.
- After successfully completing the debt counselling process, the debt review flag will be removed from your credit report and there will be NO record of having undergone debt counselling. This means you are free to start applying for credit again.
Meerkat can help you improve your chances of securing credit (loans) in the future. We offer a confidential debt review process for people wanting to pay off their debts and improve their credit score.
Want to learn more about Debt Review, read our article here.
Let us contact you! Start your journey towards debt-freedom today. Fill in the contact form now.
Who is Meerkat?
We are an authorised financial services provider and we've been voted as one of the Top 10 Large Debt Counsellors in South Africa!