Debt counselling explained
Debt counselling is a regulated process by the NCR. The process protects consumers from their creditors as no legal action can be taken once the proposed repayment plan has been accepted. It provides an opportunity to regain financial control to avoid future over-indebtedness and at the end of the process a clearance certificate is issued, and the credit record is cleared
Can debt counselling negatively impact a person’s credit score?
There is a common misunderstanding that being under debt review will negatively affect your credit score. This is not the case. Being under debt review can be beneficial to your credit score. When you enter the debt review process, creditors can no longer add any further negative information to your credit profile because you will now be under the protection of the National Credit Act. Your debt counselor will make sure your creditors are aware that you are under debt review and this means they can no longer take any legal actions against you. After the debt review process has been completed, you shall receive a clearance certificate and the credit bureaus are notified. Any details of judgments or arrears are cleared.
How long does debt review take?The duration is calculated based on the amount of debt that is to be repaid. The maximum term an individual can be in Debt Review is 60 months
Why do I not have access to credit when under debt review?
Debt review is a process implemented by the NCR to assist consumers to pay back their debts. Taking additional credit out during this time would impact existing creditor payments and would result in an individual being in a worse financial position. The purpose of debt counselling is to rehabilitate your finances
If a lender grants you a loan while you are undergoing debt counselling, this makes them guilty of reckless lending.
If you are undergoing debt counselling, this means that you are already over-indebted and can’t afford to repay your current debts. Any additional loans, including debt consolidation, will only complicate your situation. Adding to your existing debt will only hinder the process.
Who can apply for debt counselling?Anyone who is struggling to meet their monthly debt obligations qualify to apply for debt review, providing they are in receipt of a monthly income and outstanding debt is more than R20k.
What is the difference between debt review and debt consolidation?Debt review involves the restructuring of all debt repayments into one affordable monthly repayment by extending the terms of the credit agreements and decreasing interest rates. Consolidation entails taking out one large loan to settle all debts and only paying back one loan. Consolidation loans require that the individual is not over-indebted at the time of application.
How long will it take for an individual to start to feel relief from the stress of their debts?
Almost immediately. Within the first 5 days, Meerkat will have drafted a proposal to restructure the debts and have created a provisional more affordable repayment plan.
What does debt counselling cost?
The debt counsellors fee is taken from the first repayment. Creditors have agreed that by negotiating a reduction in interest rates the first instalment is paid to the counsellor. All fees are regulated by the NCR and we follow the agreed industry pricing.
Why is having a good credit score important?
Your credit score affects your ability to take out any credit. Imagine you are just starting your adult life and want to get a house, a car or any other necessities for your future. You finally save up enough money to put down a deposit on your dream home/car, then you find out that your bond/finance application gets denied because your credit score is too low.
What does the credit report tell me?
A credit report will show you all your financial history. It will show you your borrowing habits as well as your payment trends. Your report will show you every time you have taken credit, skipped a payment, how much you still owe to your creditors and a lot more. This will help you see where you can improve your spending habits. You also need to make sure that all of your personal details are correct and up to date.
Are you thinking about getting a loan while under debt review? Read here to consider all your options.
If you are struggling to keep up with your monthly debt repayments, we can help.