Many South Africans are considering debt review as a means to become debt-free.
Debt review is process that involves legal protection from your credit providers thus giving you financial peace of mind.
Why consider debt review?
Should you be in a position where you are finding it hard to pay monthly repayments on your house, vehicle, accounts and credit cards – you might want to consider debt review.
If you are on the verge of blacklisting, you can use debt review as a method to avoid any legal action taken against you. Debt review/debt counselling was introduced with the National Credit Act (NCA) in 2007. In order to take advantage of debt review you are required to receive a regular income to commit to a restructured repayment plan that fits within your budget, and gives you a larger disposable income.
Not only will this give you a bit more financial freedom but it will allow you to repay your debt without the stress associated with legal action due to default on debt repayments.
How does debt review work?
Seek advice and services from a registered debt counsellor
The National Credit Regulator’s website is a good start to find a compliant debt counsellor who is able to assist you with your debt review process. This is the first step to take should you be considering debt review as a means to regaining financial freedom.
Prepare the necessary supporting documents
These include but are not limited to a monthly household budget, a breakdown of all your debt repayments, your payslip and your South African green bar-coded ID. Your debt counsellor will advise you on any other documents, should this be required.
The debt counsellor will review your financial situation
The debt counsellor will review all your documentation and prepare an accurate report of your indebtedness. Including, what repayment amount you can afford based on your income. It is important that you include all your expenses to ensure you are covered once you are placed under debt review.
Apply for debt counselling
Once all documentation has been finalised, you are able to apply for debt review. You will also receive an official notification on costs which include the application fee, restructuring fee, monthly fee, legal fees, and any other related costs. Discuss all fees with your debt counsellor as you have a right to know exactly what costs are involved during the duration of your debt review plan.
Finalisation of your debt review process
Your debt counsellor will contact all your credit providers to confirm outstanding amounts and make all necessary arrangements on your behalf. You will also be listed as being under debt review with South African credit bureaus. Should any of your credit providers seek a higher repayment amount, your debt counsellor will seek a court appeal on your behalf. Debt counsellors in South Africa are professionals in dealing with credit providers and are able to agree on the best terms on behalf of consumers.
How can debt review help you financially?
In essence, debt review or debt counselling is a targeted solution for South Africans who find themselves indebted with little to no disposable income. It is also a method to assist those who find it difficult to manage their finances effectively. Once you have successfully completed your debt review plan you can enjoy the new-found financial freedom, and financial discipline.
Will I be blacklisted once I am placed under debt review?
No, debt review is a preventative measure to blacklisting. It offers you legal protection when you are unable to repay your credit providers. Once you have paid all your debt in full, through the process of debt review, you will have no default or blacklisting against your name. The onus is on you to commit to your repayment plan and duly pay your monthly repayments as per agreement. If you fail to do so, you may still face legal action and repossession of your assets.
Differences between debt review/debt counselling and debt consolidation?
Debt consolidation allows you to simplify your debt and your budget. In some cases, you are able to save on interest should you have many high interest bearing accounts that you are consolidating. In a nutshell, debt consolidation has a major convenience advantage.
However, essentially you are streamlining your debt as oppose to seeking legal protection or protection from repossession of assets etc.
The risk with debt consolidation is that you are able to incur more debt, which will effectively have you seeking debt review. As a result, it is important to foster healthier spending habits once you have consolidated your debt.
Debt review on the other hand does not only safeguard you from legal action but also protects you from having valuable assets such as your home or car repossessed.