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Debt Management - Get Financially Fit

Debt Counselling / Debt Review - What You Need to Know

As the Covid-19 pandemic has had devastating effects on the South African economy, individuals in South Africa have likely all felt the effects of the pandemic incredibly personally. On a financial level, some South Africans have taken out loans and acquired debt that they are frankly unable to pay back.

Debt counselling and the debt review process is the solution - and although it's not always smooth sailing if you don't get the right partner - it's nothing to be afraid of...

Firstly, debt is a multifaceted topic, which often presents many questions- especially when one finds themselves in a sticky financial situation. Simply put debt in monetary terms can be defined as money or something owed by one person to another. Debt can usually involve real estate property, capital, services, etc.

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All of which will hopefully give you a clearer idea of what the entire debt management process is about and how it can make a great impact on your life and your quest for financial freedom.

The Truth About Debt Review (also known as Debt Counselling)

When dealing with debt review/debt counselling, you want to know the facts and what it entails right from the start. The truth about going through the debt review process is that it is not always easy, but in the end, it's very much worthwhile.

Debt review was introduced in South Africa in 2007 through the National Credit Act. The National Credit Act's main objective is to assist people battling with their debt - whether it is repayments on their houses, cars, credit cards, and accounts or are facing possible repossession.

▶︎ How does one then begin the process of going under debt review?

When you are placed under debt review, 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.

This debt counsellor will then inform your creditors and the credit bureaus and draw up an interim repayment plan.

  • This plan often reduces your monthly debt repayments by up to 50% and reduces the interest rates on unsecured lending.
  • Your debt repayment plan, created by the debt counsellor, will then be submitted to a registered payment distribution agency (PDA) that makes all the payments to your creditors on behalf of the debt counselling company
  • 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 review/debt counselling.

It’s important to note that 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 successfully.

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Can I get a personal loan while under debt review?

If you're struggling with your debt and have been denied the opportunity to get a personal loan, don't worry! You can still work on reducing it by asking for credit counselling.

This will allow you time while under review- but only if this is something that would be beneficial in helping regain control of finances again after repayment has started - as opposed to just being able to access more money elsewhere like loans or cards without worrying about managing them responsibly because at least then there'd always eventually come due date where responsibility falls onto one person alone: us (the borrower).

There is a dark side to the loan industry. There are many unregistered lenders and companies that offer loans without validating your debt status, which can lead you into more debts than ever before! If this happens just remember- if something sounds too good it probably means there are hidden risks involved so be careful when considering taking out any new credit product or signing on anything at all with numbers involved as they might not always work in our favour.

The National Credit Act introduced the debt review process so that South Africans in debt would have a chance to rehabilitate their finances; the alternative would be to succumb to personal administration and deal with the long-term effects such as repossession of their assets.

▶︎ The main aim of the debt review process is to get the person debt-free and focus on their current debt instead of building up more.

You’ve seen the advantages of debt review and hopefully have a better understanding of the whole process, now we will touch on when and why you should consider debt review.

  • Firstly, while under debt review, you’ll only pay one fixed monthly payment instead of multiple payments to different vendors. Making your life much simpler! Less admin!
  • Secondly, your debt counsellor will negotiate reduced monthly payments towards debt repayment, which can help you create room to afford your expenses.
  • Third, the NCA will legally protect you from creditors repossessing your assets.
  • Lastly, credit bureaus no longer have the power to blacklist you when you are under debt review. These are, but a few reasons why going under debt review will make your life easier and lead you towards financial freedom!

What is Debt Counselling?

During the debt review process, a debt counsellor helps you with your debt management by assessing your outstanding debt, and works with you to create a restructured debt repayment plan. Debt counselling professionals are highly trained financial experts, and you must make sure that you are comfortable and trusting of your choice in debt counsellor.

The debt counsellor then makes an effort to renegotiate interest rates and repayment terms with your credit providers with the intent of reducing your debt levels.

People often wonder how you will pay your debt counsellor for their services. Your creditors agree that the first two reduced monthly repayments are allocated to your debt counsellor for their services and to cover all legal costs.

Once the debt counsellor has drawn up an affordable monthly budget and repayment plan for you, you can then start your journey to financial freedom with some breathing room and better peace of mind without any more creditors harassing you.

To Conclude:

It's vital to remember that once you've decided and finalized your repayment plan, you can't skip any payments while you're under debt review. If you miss a payment while under debt review, your entire payment plan may be cancelled.

To ensure that your debt review is effective, you must make every monthly payment under your repayment plan on time to avoid jeopardizing your debt review agreement. If you find yourself in any difficulties give your debt counsellor a call. They are often able to help

However, as we stated at the outset of this article, the debt counselling procedure is not always smooth sailing, and you may face significant challenges along the road. But it's well worth it!

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