Is it time to pursue debt review?
· The South African
Debt and stress go hand-in-hand. If your debt gets out of control, you may struggle to see a way out. That’s the moment it would make sense to consider debt review.
Should you undergo debt review?
Recent data from Statistics South Africa (Stats SA) shows how the average South African struggles to make their repayments. The report reveals thousands of borrowers end up in court over unpaid debt.
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Debt doesn’t disappear when you ignore it. Instead, ignoring it could mean you become part of the statistics.
But it’s not only the threat of a summons. A court order can lead to judgments on your credit profile. These judgments will stop you from getting other loans and can take years to clear. Then, there’s also the possibility of wage garnishment and repossession.
Debt review can help you dodge these outcomes.
Debt review, also known as debt counselling, restructures your debt before combining it into one monthly payment.
But there’s a catch.
The service providers take a percentage from that monthly repayment. These fees mean less of your money goes to servicing debt.
Furthermore, while you’re in this process, and for six months after, you can’t take out any credit or loans.
Who benefits from debt counselling?
Debt counselling doesn’t make sense for everyone. You’ll benefit from it if you’re permanently employed, drowning in debt, and don’t expect to need credit for 3 to 6 years.
If you meet these criteria, you can follow a simple process to begin the debt review.
- Contact a company with a good reputation. Check Hello Peter, Google, and Facebook to see if a company offers a valuable service. Contact the ones with better reviews.
- Compare fees. Debt counsellors take a percentage of your debt for providing the service. Find out how much that is before you sign up. Then compare it to others.
- Check if you qualify. When you sign up, the counsellors will assess your financial obligations to determine if you qualify for debt review.
- Add a buffer to expenses that fluctuate. You must list your expenses as part of the process. Usually, whatever is left over goes toward paying back debt. Budget more for expenses like electricity, transport, and groceries, as these change.
- Commit to the repayments. If you don’t maintain this obligation, you’ll go back to square one. Then, your creditors can take legal action against you.
Debt Counselling or Debt Consolidation?
Borrowers confuse debt counselling with debt consolidation. In debt consolidation, you take out new debt to pay back existing debt. These consolidators pay your debt in a lump sum, then you repay them.
Debt review isn’t the same.
When you’re under debt review, you receive legal guidance from experts. With their help, you’ll create a budget and repayment plan. Then, they negotiate your debt repayments to an amount you can afford. This agreement is submitted to court before being approved and becoming legally binding.
Debt counsellors also have to be registered and approved by the National Credit Regulator (NCR). You can find a list of registered debt counsellors on the NCR website.