You might be on the fence about deciding whether to undergo debt review or not. Any decision that impacts your personal finances feels like a big one. And one that requires considerable thought. That’s fair, we agree.
There are many reasons why you might be considering debt review, one of which is probably the lower monthly debt repayments. If you are over-indebted and decide to undergo debt review in South Africa, a debt counsellor will help you create a repayment plan that takes your net income and monthly expenses into account.
The restructured debt repayment plan consists of a single reduced instalment distributed amongst your creditors via a payment distribution agency or PDA.
What this means is that you’ll unlock some of your income for your living expenses and pay one lower monthly instalment – making it more affordable each month and much easier to keep track of your total debt.
Now that you have a better understanding of what a lower monthly debt repayment is, let’s look at four massive benefits that your reduced repayment offers:
The problem with being over-indebted is the inability to afford to repay your debt and usually some of your necessary living expenses. This predicament is far from favourable and can cause a lot of stress. What do you do? Should you pay for your basic needs or repay your debt? You shouldn’t have to choose between the two, and you shouldn’t have to compromise.
You’ll be able to afford both while under debt review. Remember, the debt counsellor takes your income and expenses into account, then reduces your monthly debt instalment so that you can afford to repay your debt and cover your living expenses.
Some participants have their monthly debt repayment reduced by more than 50%.
Monthly debt repayment before debt review = R10 976.60
Reduced monthly debt instalment under debt review = R6 409.10
That is a monthly reduction of R4 567.50 or 41.61%.
Because every consumer has different levels of debt and different levels of income, this reduction can vary.
As we mentioned, the debt counsellor takes your expenses and your income into account when creating your debt repayment plan.
You’ll provide a detailed account of your monthly earnings and the cost of your living expenses during the debt review application process.
This information is collected to calculate a monthly debt repayment that works for your current situation – this ensures that you’ll be able to repay your debt each month and continue to meet your basic needs.
Now, there will be money left after paying your new reduced debt instalment each month. Some debt counsellors refer to this as unlocking cash since it frees up some of your income. Income that was previously earmarked for your creditors.
Tracking how much you still owe each of your creditors individually and constantly recalculating what you owe each month is unnecessarily tedious. Debt review offers a simple solution – one manageable reduced monthly repayment.
As we mentioned in the introduction, the debt counsellor helps consolidate all of your accounts into a single monthly instalment and distributes it to all of your creditors via a payment distribution agency. But don’t worry about the technical details. This is all taken care of for you.
What’s important is that your life gets a lot easier when you only have to make one payment each month.
People often overlook some of the “hidden” benefits of debt review. These are things that happen in your life when you escape the stress of unmanaged debt.
It’s extremely difficult to focus on new opportunities and improve your life when there’s a big problem staring you in the face.
Debt review solves your debt problem and allows you to focus on improving your finances. Now that you have more time and the breathing room to focus – you can start to develop habits that will improve your finances over the long term.
Take the time to read a personal finance book or play around with investments using a free demo account. Then, as soon as you are declared debt-free, you’ll have the finances and the knowledge to start growing your wealth.
Our goal is to help over-indebted South Africans transition from over-indebted to wealthy, and the process starts by taking care of the debt.
It may seem like a long journey, but it’s an adventure. Imagine your life without debt. What would it look like for you or your family?
Take the necessary steps to manage your debt now; you won’t regret taking control of your finances.
Find out if you’re eligible to reduce your debt and protect your belongings.
Disclaimer: This website and any information herein is not intended to be, nor does it constitute, financial, tax, legal, investment, credit, or other advice. Before making any decision or taking any action regarding your finances, you should consult a qualified professional directly.