Debt review, also known as debt counselling, was introduced in 2007 with the National Credit Act and is there to assist South Africans who are battling with their debt obligations; whether it is repayments on their houses, cars, credit cards and accounts, or are facing possible repossession of their assets.
Ever wondered about the national debt statistics in South Africa? About 8 million credit-active consumers are in debt-distress.
What does it mean to be under debt review?
Being under debt counselling means you have appointed a Debt Counsellor for debt review who has worked through your income and expenses and has determined that you are over-indebted and debt-stressed. This entire process is regulated by the National Credit Regulator (NCR) under the National Credit Act.
How does the debt review process work?
Once the Debt Counsellor has determined that you have too much debt, your Debt Counsellor will put together a repayment plan for you, inclusive of repayment terms, for your outstanding debt and you are placed under debt counselling.
This plan often reduces your debt repayments by up to 50%.
At this stage, your creditors and the credit bureaus will be informed that you are undergoing debt counselling.
There is also a reduction in interest rates on unsecured lending, meaning you pay less for your overall debt. This plan would be submitted to a registered payment distribution agency (PDA) that makes all the payments to your creditors on behalf of the Debt Counsellor.
Once your creditors accept the revised repayment plan, legal action cannot be taken against you concerning your debts under review.
Once all your debts have been repaid, you will be issued with a clearance certificate by your counsellor and they will notify the credit bureaus that you are no longer under debt counselling.
Debt counselling is not like blacklisting and any record of being under review will be removed from your credit record once the process has concluded.
Watch Moku, our Chief Meerkat tell you a little more about how we can help!
▶︎ Read more about Debt review: Everything you need to know.
So what should I do if I’m under debt review?
While under review, make your monthly repayments on time and watch your debt reduce over time. Enjoy the protection the process provides you and remember, this is your journey to becoming debt-free
What shouldn’t I do when under debt review?
When you’re under review it is important to stick to your repayment plan, as skipping the repayments will cancel the agreement.
You are not able to access further credit whilst in the process. This is to make sure your debt is reduced to a zero balance and then your credit report is cleared.
Is debt review a good idea?
Debt review is a great idea for anyone who is struggling to keep up with their monthly repayments. Sleepless nights worrying about how you will pay for everything can be a thing of the past.
5 Reasons why you SHOULD GO under debt review
- The debt review process involves reducing the number of your monthly instalments, so you can keep up with them- as well as afford your essential living expenses.
- The process means you will only have one amount to pay each month and the PDA will distribute to creditors according to the agreed plan.
- Debt review protects you from losing your property and assets.
- Your Debt Counsellor will deal with all your creditors, you no longer have to avoid their phone calls.
- You get a clearance certificate and a clean slate at the end of it.
REMEMBER! Debt review is not a way of financing a lifestyle beyond your means or a quick fix that will get you out of paying off your debts. Our team at Meerkat will present you with options that are designed to improve your financial circumstances, not to put you deeper in debt.
▶︎ Debt Counselling / Debt Review - Find out what you need to know
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How much does debt review cost?
Debt review fees, like the time spent in the process, is dependent on how much debt you have. What's very important is that The National Credit Regulator provides a guideline for all the fees involved in debt review. This means a Debt Counsellor cannot exceed certain amounts as prescribed by The NCR. Your debt counselling fees are usually taken from the first two monthly installments you make towards your repayment plan with debt review. It's also important to note that free debt review does NOT exist.
How long can one be under debt review in South Africa?
While the exact time someone spends under debt review differs from person to person, the maximum time an individual can be under debt review is 60 months (5 years). The reason there is no set time is that every person has a different amount of debt and a different affordable monthly installment they can make, while still prioritising their daily living expenses.
Will I get a loan after debt review?
Once you have successfully completed the process and received a debt review clearance certificate, you can apply for a loan. Debt review is not a life sentence. It is important to note, however, that you will have to slowly start building up your credit score again before doing so. The reason for this is that debt review gives you a clean credit slate. This means, before you can get new loan, you will have to open a retail account for example, to slowly start building your credit score again. Thereafter, you can apply for a loan.
▶︎ Can I get a personal loan while under debt review?
What are the disadvantages of being under debt review?
A disadvantage that scares many people is that when you are under debt review, you will not have access to any new credit. This is actually a benefit to you because you cannot get out of debt by creating more debt. While a loan to cover your debt and emergency expenses may seem necessary, it is always only going to be a temporary solution. See debt review as a more long-term solution to help you get back on-track with your finances.
Also, if you are already struggling to make all your monthly payments, adding another by taking out an extra loan, will just make it worse.
What is the best way to get out of debt review?
The best way to get out debt review is to complete the process and pay all your debt. If you have paid all your debt and you still have a debt review flag on your credit report, we can get you removed from the debt review process.
How many years does it take to be cleared from debt review?
As was mentioned earlier in the blog post, this depends on how much debt you have, how much you can afford to pay each month, and it also depends on if you can make extra payments towards your debt. Making extra payments can mean completing the process earlier.
What are the consequences of debt review in South Africa?
Immediate relief from a stressful financial situation. The opportunity to exhale and know that you don't have to choose between buying groceries and petrol or transport money.
Final thoughts
Debt review is a legal process that provides consumers with a way to manage their debt and avoid being declared insolvent. It involves a debt counsellor who assesses your financial situation and negotiates with your creditors on your behalf to create a debt repayment plan that suits your budget. Debt review can provide you with a lifeline if you are struggling to pay your debts, as it offers protection against legal action and ensures that you pay a reduced, affordable monthly installment. However, it is important to note that debt review is not a quick-fix solution and requires discipline and commitment to stick to the repayment plan. If you are in financial difficulty, it may be worthwhile to consider debt review as a viable option to get back on track financially.
Why Meerkat?
Meerkat is registered with the NCR (National Credit Regulator – NCRDC2613). We understand that life happens, and you can start to fall behind on your debt repayments. We can help you regain financial control and walk the journey with you to becoming debt-free. As a team, we’re looking out for you.
We also offer competitive credit life cover to protect you and your family if you die, are retrenched, become disabled or suffer a severe illness.
Do you know how much you are paying on your current loans for cover? We may be able to replace your existing cover where it makes sense to do so.
We will also kickstart an emergency savings fund as part of your debt management plan. This ensures you have funds available for when life happens. Don't delay, get started today!
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