How many credit cards do you have? How many credit accounts do you have open? Buying on credit aids the human need for instant gratification. Many would say that buying on credit is good for you, but the truth is, whilst under debt review not having access to credit is the best thing for you.
What is debt review?
Debt review, also known as debt counselling, is a debt solution offered to South Africans that are over indebted and struggling financially. There are over 8 million South Africans that are in this position. During the debt review process a debt counselor reviews your existing obligations against income and determines your debt to income ratio. If you are deemed to be over-indebted a revised repayment plan is proposed to all your creditors and often reduces your monthly repayments by up to 50%.
Read more for more information about debt review.
When you are under debt review you are unable to access more credit. Most people have the perception that this is a bad thing, but it is the most beneficial to you and your finances. There are so many benefits to not having access to credit. Here are just a few to show you why it is beneficial.
It teaches you useful habits and skills
When you do not have access to credit due to being under debt review, it takes away your ability for instant gratification. This restricts you in a good way because you cannot increase your debt and will therefore be in a much better financial position in the future. Being restricted will also teach you how to be more money savvy and eliminate the previous need for instant gratification. Having no access to credit will then put you into the habit of not spending on credit. When the process is complete you will no longer find it difficult to not spend on credit as it has become a habit not to.
You are unable to get into more debt
When you are a debt review client you have no access to credit, you cannot take out anymore loans or accounts. This ensures you have enough money each month to make your monthly repayment to your existing debt.
A court order is granted as part of the process to protect assets and the individual and repayments must be made as set out in the revised repayment plan. Failure to do so results in termination and creditors can proceed with legal action.
It can be good for your mental and physical health
Studies have shown that being in debt is bad for your physical and mental health. Being in debt has been linked to health issues such as a high blood pressure, bad digestion and muscle tension. It has also been linked to depression. It can even cause problems in your relationships with your family or your partner. Not having access to credit means that your debt is decreasing and relives the bad health and mental factors. Read more here.
You can start saving
After the debt review process has ended, instead of paying towards your debt, you can start paying towards a savings account. This will make sure you are secure financially for the future. It also ensures that you ready in case there is an emergency in your life, you have a savings account to fall back on so you can avoid being in debt in the future.
Having no access to credit is good for you. It is difficult but you will come out in a better financial position and in better mental and physical health
Check out some of our other articles for more information on debt review.
Who can apply for debt review?
Debt counselling and employment.