The Truth about Debt Review
Thanks to the recent economic crisis, people are more familiar with debt than they would like to be. Unfortunately, they are also applying for debt review for all the wrong reasons – thinking they can avoid their debts when they really need to confront them with lifestyle changes.
What is debt review?
Debt review was introduced in 2007 with the National Credit Act and is there to assist people who are battling with their debt and to prevent consumers from being blacklisted; whether it is repayments on their houses, cars, credit cards and accounts or are facing possible repossession.
What does it mean to be under debt review?
Being under debt review means you have appointed a debt counsellor, who has worked through your income and expenses and has determined that you are over-indebted and debt stressed.
The debt counsellor would have informed your creditors and the credit bureaus and drawn up an interim repayment plan. This plan often reduces your debt repayments by up to 50%. There is also a reduction in interest rates on unsecured lending. 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 with regard to your debts under review.
Once all your debts have been repaid, you will be issued with a clearance certificate by your debt 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.
So what should I do if I’m under debt review?
While under debt 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 debt 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.
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.
Reasons why you SHOULD NOT cancel your debt review
- If you cancel, you will still be marked on the credit bureau as being under debt review until you have cleared the debt yourself.
- Credit providers will be able to take legal action against you once again.
- You will no longer be on your way to rehabilitation.
- Your credit profile will be adversely affected.
- You may be rejected for certain positions of employment, should you apply for them.
- You will be rejected for loans at reputable financial institutes.
If you have a desire to become debt-free, we are here to help. Feel free to get in touch.