Debt Restruct

Debt Review Definitions: All the Terms Explained

Debt has been a considerable financial problem for many people around the world, and especially here in South Africa. Consider the economic climate in our country, it’s not surprising that thousands of South African consumers turn towards credit cards, loans, and other forms of debt to maintain a normal lifestyle or afford certain luxuries.

In 2007, to combat the ever-growing number of over-indebted South Africans, the NCR introduced debt counselling. Debt counselling plays a vital role in helping people in debt regain control of their finances and get back on track.

If you are planning on speaking with a debt counsellor and would like to get a handle on some of the terminology, then this glossary is an excellent place to start. To help you, we’ve compiled a list of debt review terms and their definitions in this convenient glossary of debt review terms.


All the Debt Review Definitions That You Need to Know

Blacklisted: A listing found on an individual’s Credit Report that indicates an unfavourable credit history.


Budget (personal): The calculated income and expenses of an individual for a specific period of time. A budget is usually recalculated periodically.


Borrowers: Borrowers are individuals that borrow money, usually in the form of a loan, in exchange for timely repayment within agreed terms.

Clearance certificate: This is a statutory form issued by a debt counsellor indicating that someone has settled all of their debts according to their debt repayment plan.


Credit: The ability of a customer to obtain goods or services before payment, based on the trust that the customer will make payment in the future and within the terms and conditions agreed upon by the customer and the creditor.


Collateral: There are two types of collateral: primary and contingent. Primary collateral is that which guarantees repayment of the debt regardless of the borrower’s default status while contingent collateral is only available when certain conditions are met by borrowers who default on their loans.


Credit: This is used when you borrow money from someone else or an institution.


Credit Agencies/Credit Bureaus: A credit bureau is an agency that collects, researches, and maintains individual credit information so that the credit information can be supplied to potential lenders, employers, landlords, etc., as a reference tool for informed decision-making. They are set up to provide information about businesses or people who borrow money from banks and other lending institutions.


Credit card: A credit card is a plastic card issued by a bank or third-party lender, which allows the cardholder to make purchases using money that is borrowed from the issuer.


Creditor: A creditor is an entity that gives a loan or issues credit to a borrower. Debt is money that is owed to creditors. 


Credit Provider: This is a registered financial institution that grants credit to a consumer. The consumer can use the credit a credit provider grants them to buy goods and pay for services, in exchange, the credit provider collects interest for providing the credit.


Credit Report: This is a detailed record of the financial history of an individual or business that includes information such as the amount of debt, credit limits, payment history, and open loans. A credit report provides insight into the current credit status of an individual or entity.


Debt: An amount owed for money borrowed. A consumer may owe the debt to individuals, banks, or other financial services providers.


Debt Administration: This is a management service that is often the first point of contact for people with debt problems. A debt administrator is a licensed attorney or enrolled agent that applies for an extension of the loan term on behalf of the debtor (consumer with debt) after taking the debtor’s finances and basic needs into account.


Debt consolidation: Debt consolidation refers to the act of taking out a new loan to pay off other liabilities and consumer debts. Multiple debts are combined into a single, larger debt, such as a loan, usually with more favourable payoff terms—a lower interest rate, lower monthly payment, or both.


Debt counselling/review: Debt Counselling is a structured process regulated by the National Credit Act that helps over-indebted consumers to repay their outstanding debt by simplifying the repayment process and creating more manageable repayment terms.

Debt Counsellor: A debt counsellor is an individual that is qualified by and registered with the National Credit Regulator to offer assistance and advice to over-indebted consumers.

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Debtor: A debtor is a company or individual who owes money.


Debt repayment plan: This is a strategic plan developed by a debt counsellor that helps debtors to repay their outstanding debts by setting repayment terms that the debtor can manage.


Default: This is the failure to make the necessary repayments on a loan.


Home loan: Home loans refer to credit granted for purchasing, building, renovating, or refinancing a property such as a house or an apartment.


Insolvent: Insolvency describes a state of financial distress in which a person or business cannot pay their debts. Assets may be liquidated to pay off the outstanding debts.


Instalment: The amount that is owed to a financial institution to repay the initial loan. The instalment consists of capital and interest calculated based on the loan agreement.


Interest Rate: A charge for money borrowed generally stated as a percentage of the amount borrowed.


Loan/Credit Agreement: This is an agreement between two parties, in the form of a formal document, where one party provides money to the other on the condition that the recipient will repay it at a later date with interest.


Late Payment: This is a failure to pay a bill by the stipulated due date. The creditor may report this to a credit bureau if the account is not paid within 30 days or more.


Outstanding Debt: This refers to the amount of debt that has not been paid off and is still owed. If someone owes Rs. 12,000 but only pays Rs 8,000, then their outstanding debt is Rs 4,000 with accrued interest.


Married in Community of Property: In a community of property marriage, all assets and liabilities belonging to an individual and their spouse are merged into one joint or communal estate, subject to a few exceptions. The couple shares everything they earn, including any debts and liabilities.


National Credit Regulator: This is the body that regulates and supervises the credit industry in South Africa. The NCR ensures that credit providers, credit bureaus and debt counsellors comply with the National Credit Act.


Overdraft: This is the difference between a person’s checking account balance and the total amount of money that they have with the bank. An overdraft allows a customer to spend more than is available in their account.


Over-indebted: This refers to a consumer who has too much debt and struggles to meet financial obligations. Often used to describe an individual that doesn’t have enough money to pay their monthly instalments after their living expenses are deducted from their net salary.


Payment distribution agency (PDA): A payment distribution agency (PDA) distributes a consumer’s monthly debt repayments to their creditors.


Personal Loan: A personal loan is a loan that an individual qualifies for based on their credit history and income. Unlike home loans, personal loans may be used for a variety of purposes.


Reckless Credit: This is the practice of offering a loan with little or no collateral and without any real guarantee that the loan will be repaid.


Sequestration: This is a term that describes the act of taking assets from the debtor or forcing them to sell their assets because they can no longer meet their financial obligations. Sequestration can be a lengthy and expensive process.


Vehicle Finance: Vehicle Finance refers to when a bank or other financial institution grants credit to a person to assist in buying a vehicle.

There you have it! Now you’re armed with the definitions of all of the terminology used by debt counsellors, creditors, and other financial institutions. Feel free to refer back to this list whenever you’re unsure what a professional is referring to.

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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.

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