Welcome to the best resource for learning absolutely everything that there is know about debt review.
This guide will cover a number of popular topics, such as what is debt review and how does debt review work. Plus, we’ll break the debt review process down for you step-by-step.
Debt review (or debt counselling) is a service that helps over-indebted consumers that are struggling to repay their debt.
The debt review process helps in several ways. It helps to make your debt repayment affordable by reducing your monthly repayment amount, protects you from creditors, and simplifies the repayment process by consolidating your debt into one convenient payment, amongst other things. We’ll get to all the benefits in a moment.
Some of this language may sound technical at first – so if there are any terms that you aren’t familiar with, please take a look at our glossary of debt review definitions to look up a word.
Being over-indebted is no fun and is often coupled with high anxiety levels and sleepless nights.
You are classified as over-indebted when you do not have the means to meet all of your monthly debt obligations or financial commitments.
Are you overwhelmed by your rising debt?
Besides debt payments, you could be missing your insurance premiums, utility bills, or even struggling to buy bare essentials like groceries or fuel for your car.
If you are not paying the balance on your credit card in full each month, you are likely to be living beyond your financial means.
As your credit card balance increases so too do your minimum monthly payments. Paying only the minimum on debt payments may indicate that you need help with debt.
Are you often in the red and relying on your overdraft facility to make it through the month?
When your financial troubles become so significant that you are constantly worrying about them and you are losing sleep trying to find ways to alleviate your woes, you need help.
It is important to have an outlined budget detailing all income and expenses. The lack of a budget makes it difficult for you to assess your financial health.
A spending plan can help you navigate your spending pattern. The inability to stick to a spending plan may be a telltale sign that you have financial issues or trouble with overspending.
The main reason an application is declined is due to bad financial health. It may be time to assess your financial well-being.
Are the debt collectors calling you more often than your BFFs? Once you are on the debt collectors list, your credit scores can be badly tainted.
If you are unable to save because all your money is being used to pay bills, your financial future is in trouble.
Now that you know what it means to be over-indebted and what debt review is, let’s take a look at how the debt counselling, or debt review, process works.
Individuals are declared over-indebted when they have an imbalance between income and credit expenses and cannot pay their debt on time.
Since its introduction, debt review has helped hundreds of thousands of over-indebted consumers escape the clutches of severe and often debilitating debt. If you are declared over-indebted, you may apply for debt review to help you take back control.
To understand why the service is considered the best solution for anyone who needs debt help, let’s review the process and its benefits.
Here is a quick step-by-step summary of the debt review process:
It is noteworthy to mention that you can submit a postponement application if an unexpected change in circumstances prevents you from making payments.
The process is regulated by a regulatory body. For example, in South Africa, the debt review process is regulated by the National Credit Regulator (NCR). Having an established regulator means that you can rest assured that debt review companies adhere to ethical practices and standardized procedures. Just make sure that you’re dealing with a registered entity by checking with your national regulator’s database of registered debt counsellors.
Check out our detailed guide to the debt review process to learn more about what you can expect at each step of the procedure.
Of course, by now, you’re wondering what the advantages and disadvantages of debt review might be. Thousands of individuals worldwide proclaim debt review as the best solution for overcoming debt problems. And with good reason. Let’s see what the pros and cons of debt review are:
Your debt counsellor can significantly reduce your total monthly debt repayment. As a result, you’ll be able to afford your everyday expenses and breathe again.
Debt review consolidates your payments into one simplified payment. Therefore, making it easier to repay your debt without accidentally missing a payment and keeping track of your total debt and your progress towards becoming debt-free.
The debt review process protects you from creditors, and your debt counsellor assumes the responsibility of communicating with your lenders.
The National Credit Act does not apply to all forms of credit. Therefore, the process may not include these loans and debts:
The debt review status initiates a credit freeze, so you won’t be able to make more debt by accessing additional credit while undergoing the process.
The service isn’t free – there are a few regulated fees to consider. We’ll talk more about the cost of debt review later.
It is important to look at the bigger picture when considering your options. In the long run, these are insignificant trade-offs.
Debt review is a specialized service that navigates various financial and legal requirements, and consequently, the national regulator could include fees to ensure that the process remains sustainable.
So, what is debt review going to cost? Let’s review the debt review fee structure in South Africa in more detail.
For international readers: You can reference of the dollar of debt review in this article.
| Fee | Amount | Payment Terms |
|---|---|---|
|
Application fee |
R50 |
Payable upfront |
|
Administration fee |
R300 |
Payable upfront |
|
Restructuring fee |
Equal to the distributable amount to a maximum of: R8,000 (single person) or R9,000 (married couple) |
Paid in month 1 after proposals are drafted and submitted |
|
After-care fee |
5% of the distributable amount up to a maximum of R450 |
Paid each month after month 2 until the debt is discharged |
|
NCT submission fee |
R500 plus the current NCT filing fee |
Paid in month 2 |
|
Attorney fees |
Equal to the restructuring fee
(cost may vary between service providers) |
Paid after the attorney drafts the court application, attends the court hearing or if a credit provider does not accept the repayment plan |
Another term that is often brought up along with debt review is debt consolidation, and more specifically debt consolidation loans. Next, we’ll explore the differences between these two options.
Debt review is financial rehabilitation. It is the process that we’ve been discussing in this post. To summarize for the comparison: a debt counsellor is assigned to you and negotiates an affordable payment arrangement with your creditors.
Once approved, your debt is consolidated and your monthly repayment is made to the debt review company who then distributes the money to your creditors on your behalf.
When you embark on the debt review process, you are protected from creditors. This means no more harassment, and also, no more reckless lending. While under debt review, you won’t be able to take out a new loan and make more debt until the process is complete.
A debt consolidation loan is when a credit provider pays off your outstanding debt with a new loan. You are then liable for a monthly payment to the consolidation loan provider. Usually, the new loan will have different repayment terms.
Debt consolidation loans allow you to access more credit, and to make more debt, but be careful, this can be a very slippery slope.
In short, both are options that are available for debt consolidation (combining your debt into one simplified monthly amount), but with different terms which make each option more, or less applicable based on your situation.
It is the end of your debt review journey; step six of the debt review process, you reached the finish line. What happens when debt review is done?
Once you complete the reduced repayment plan and make the last payment, your debt counsellor issues your clearance certificate and notifies the credit bureau and the NCR. You have successfully repaid your debt, and the debt review status is removed from your credit profile.
Furthermore, if you have a home loan and you’ve repaid all of your debt, except for your home loan or mortgage, then you will also be eligible to finish the process. Speak to your debt counsellor to learn more about finishing “early” under these circumstances.
Many applicants wonder how long debt review remains on their credit profile. The great news is that it doesn’t. Your debt review status is removed without a trace as soon as you complete the debt review process and your clearance certificate is issued.
You’ll also be happy to hear that, despite popular belief, debt review doesn’t harm your credit record. This is a common misconception about debt review, and here’s why some people might think so.
People often assume that there is a negative impact because of the credit freeze. However, the credit freeze is just a temporary part of the formal process. In fact, many argue that undergoing debt review could positively affect your credit record if you diligently stick to your repayment plan and complete the debt review process.
Now, let’s suppose that you are over-indebted, and you don’t take action – what happens then?
When creditors become troubled by your inability to make payments, they’ll start the debt collection process.
Here’s how it works. Once you have missed one or more debt payments, the creditor will hand you over to the debt collector. There is no one more persistent than a debt collector.
If after numerous attempts the debt collector is unable to reach you or you fail to stick to the agreed repayment plan then they will attempt to recover the debt through litigation.
The notice is sent to your “domicilium citandi et executandi” and provides three possible solutions. If you do not respond to the notice within ten working days of the date of issue, a summons will follow.
The summons is delivered by a Sherriff of the Court. If after three successful attempts to serve you the Sheriff will leave it in a post box or affixed to an entrance and it will be considered served.
If the summons is ignored or for some reason you never receive it, a judgment will be granted and the creditor will ensue action to recover the outstanding debt.
We all come from different backgrounds, and what led to becoming over-indebted varies from person to person. Nevertheless, there’s a way out. There is a proven path to debt freedom and, eventually, financial freedom. Each month, the debt review process marks the start of this journey for thousands of people currently living with debt.
What is debt review to them? It’s a new beginning and a chance to rebuild. This time to build long-term sustainable wealth and leave their debt behind in the rubble where it belongs. As nothing but a hard lesson on the road to a brighter future.
Where are you along this journey? To learn more about debt review, from our award-winning team, try our free debt assessment today.
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.