Got debt? You’re certainly not alone! Many South Africans are faced with huge debt problems, especially now since the lockdown. One of the possible solutions to help you would be to go under debt review. But what is debt review and how does it work?
What does debt review mean?
Debt review, also known as debt counselling, is a process to assist consumers to pay off their debts and to prevent them from being blacklisted. Debt review has the following advantages:
- You will be assisted by a professional to draw up a manageable budget that you can follow.
- You will only pay 1 single monthly debt repayment.
- All communication to your credit providers (those you owe money to) will be dealt with by the company managing your debt review. You don’t need to take any calls from anyone you owe money to.
- Your debts will be renegotiated on your behalf to make them more affordable and manageable for you.
- Legal protection.
- You will not be blacklisted.
- You will end up being debt free!
So what this really means is that:
- You will receive debt counselling and personal finance skills
- You will be assisted to draw up a plan to help you pay off your debt
- Someone will negotiate better interest rates and terms for your debts
- You are not allowed to take out any more debt until you have paid everything off
The fact that you cannot take out any further debt is what scares many people from this process. However, given the advantages and the fact that you will end up debt free, it’s really not such a bad thing. Learning to manage your money better and use a budget properly is invaluable and can have lasting effects on your financial future!
Is debt review a legal process?
The Debt Review process is a legal process that was introduced in South Africa by the National Credit Act in 2007. The process is for South Africans with a valid ID or passport, who are over-indebted. Thus, you may not qualify for debt review if you are able to manage your debt, even if it’s a struggle. Debt review is only for people who can absolutely not manage any more, kind of like the final resort to sorting out their debt.
The process gives you legal protection from creditors (people you may money to) so you will need to meet your end of the agreement and stick to the payments. Also, as the process is specifically set up to assist you to pay off all your debts and you or your spouse should earn a steady income in order to apply.
This is a legal process and there are definite procedures to follow.
Is debt counselling a good idea?
If you’re over-indebted and cannot cope with your situation, then YES, debt review is a good idea! You should however find a reputable debt counselling company to assist you, so do your homework. Firstly, your debt counsellor must be registered with the National Credit Regulator (NCR). Then, ask them for referrals, search for online reviews about the company and make sure you understand what costs are involved.
There are many reputable and reliable debt counsellors, but there are also the “sharks”. Know who you are dealing with.
Can debt review be cancelled?
Yes. But it’s a little tricky. Obviously if your debts are all paid then the debt review process will automatically be cancelled. If however your debts are not all paid but you feel that you can manage the repayments, you may apply to a court to have the debt review process cancelled. You would need to work with a professional and will need to pay for their services.
How long does debt review take?
The debt review process will usually take upwards of a year to complete. This however depends on your budget and how fast you can actually pay the debt off. And obviously, how much debt you actually have! Your debt counsellor will want to ensure that you can afford the payments and are not pushing your budget too tightly and will ensure that your budget is actually manageable. Thus, it could take a year and possibly even 2 or 3 years.
What happens once your have paid off your debt?
Once you have paid off all your debts your debt counsellor will notify all the credit bureaus that you are formally out of debt review. This means, in theory, that you can take out more debt. But in reality you really shouldn’t! If you have worked hard to pay off your debt and get your finances in order, don’t start down that path again.
Being debt free is incredibly liberating! It doesn’t necessarily mean that you’re rich or that you have everything that you want. What it does mean though is that your finances are in a good position. You don’t need to stress about debts and you can use your full salary to pay for things that you need instead of paying off past debts.
Once you have learnt to live within your means and buy only what you can afford, keep doing it!