The pros and cons of debt counselling

If you're in a tight spot financially, unable to pay for all your debt, you've probably come across or heard about debt counselling. In this blog post we'll briefly unpack:

• What debt counselling is. 
• The pros of the debt counselling process.
• The cons of the debt counselling process. 
• The criteria you should use when selecting the right Debt Counsellor or debt counselling company. 

What is debt counselling in South Africa?

Debt counselling was introduced by The National Credit Act (NCA) and is aimed at South African consumers who are unable to keep up with the repayments of their monthly repayments. It is a regulated process that helps these over-indebted consumers properly manage the repayment of the debt so that they can actually:

• Make their debt repayments each month and eventually be debt free!
• Breathe easily again because they can now pay their debts AND have a decent living budget without worrying about creditors harassing them over the phone. 
• Keep their home and car without worrying that legal action can be taken against them.
• When you are under debt review, your assets (your home and your car) are legally protected from repossession. 

How does debt counselling work?

When a client is under debt review, a Debt Counsellor will work out a new reduced, affordable repayment plan that takes their essential living expenses into account. Often, clients at Meerkat can reduce their monthly debt repayment by up to 50%! This is achieved because our Debt Counsellors negotiate with your creditors on your behalf so that you interest rates on your loans may be reduced.

Once your creditors have agreed to the new repayment plan and this plan is taken to Court, a court order will be in place and you will now start paying one, reduced instalment for all your debt!

After successfully completing the debt counselling process, you will be issued with a Debt Review Clearance Certificate to let creditors and the credit bureaus know that you are no longer under debt review. 

*Debt counselling is regulated by The National Credit Regulator. 

Pros of debt counselling

• You will pay ONE reduced monthly installment for all your debt. 
• Your monthly debt instalment can be reduced by up to 50%. 
• We negotiate with your creditors to reduce the interest rate on your loans. This can end up saving you money in the long-run. 
• Your home and your car are protected from repossession. 
• You no longer get harassed by creditors. 
• You can finally get your life back without having to worry about your finances anymore. 

Cons (disadvantages) of debt counselling

• When you are under the debt review (debt counselling) process, you will no longer be able to take out anymore credit. This means that any loans or credit you apply for under the process will very likely be rejected. 
  • What's important to note here are three things:
    • This 'ban' from taking out any further credit is only temporary. Once you have successfully completed the debt review process, you WILL be able to apply for credit again. 
    • You will very likely be in a much better position to apply for credit as you will have improved your credit score while you are under the debt counselling process. 
    • To get out of debt in a sustainable way (one that actually lasts), you cannot take out any further debt. Your debt is already not manageable, you can't take out more debt. 
• Debt counselling is not a quick fix. This process will require patience and discipline on your end. But the rewards will be so worth it. You are worth it. 

The criteria for selecting the right Debt Counsellor or debt counselling company

• The Debt Counsellor needs to be registered with the National Credit Regulator (NCR).
  • Meerkat has registered Debt Counsellors.  Registered Debt Counsellor NCRDC 2613.
• The client reviews need to be good.
  • Meerkat has received a a 4.41 rating on Hellopeter.
• The debt counselling company partners with a reputable Payment Distribution Agency (PDA).
  • Meerkat partners with South Africa's most reputable PDA- Hyphen PDA.

Who is Meerkat?

Meerkat is a financial wellness company that aims to help South African consumers do MORE with their money. We do this by helping with debt repayment negotiations, providing affordable funeral insurance and helping you kickstart an emergency fund!

Fill in the contact form on our website to receive a free callback from the Meerkat team today.