Debt Restruct

What is a Debt Repayment Plan and How Does it Work?

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Once you decide it is time to get out of debt, the next step is to set up a debt repayment plan.

In most cases, finding the fastest way to pay off debt with the lowest interest rate is the goal. Using this method, you avoid bankruptcy and damaging your credit score. 

When it comes to debt, asking for help is hard – but living with debt can be even harder. When we earn a good salary, we assume that we’ll automatically understand how to manage our income well. However, having a knack for managing money doesn’t come naturally to everyone. Therefore, it’s okay if you don’t know how to get your finances back on track. In this case, trusting a professional to draft a debt repayment might be a better idea than setting one up for yourself.

If this sounds like you, then a pro, like a debt counsellor, can help formalise the process, setting you on a clear path to financial freedom.

Let’s get started by learning what a debt repayment plan is.


Let’s clear up any confusion – What is a debt repayment plan?

To put it simply, a debt repayment plan refers to a plan that an over-indebted individual (or a professional) creates to help eliminate debt by simplifying and optimising how monthly debt instalments are repaid. A debt repayment plan is a more formal way of paying off specific debts in the most efficient possible manner, and may extend to an agreement between the debtor and their creditors.


Getting a professional debt repayment plan

To set up a payment plan, your creditors must first agree to one (it’s in their best interests as a plan can help them get their money back). When you deal with a debt counsellor, they will guide you through the debt review process and create a debt repayment plan for you, calculate your payments, and deal with your creditors on your behalf.

You will make monthly repayments in accordance with your repayment plan until your debts are cleared.

The main benefits of working with a counsellor include: 


Receiving expert advice: The process begins with a form of financial counselling where a debt counsellor reviews your budget, debts goals, and options to help you decide the best course of action. 

Reduced payments and fees: Your counsellor can work with your creditors to reduce your monthly payments and waive previously charged fees, helping you pay down your debts and free up space in your budget for other necessary purchases.

Getting creditors to agree to a reduced debt repayment plan without the help of a debt counsellor could be very challenging.

Faster debt repayment: Your debt counsellor may be able to negotiate lower interest rates, which will allow you to use more of your payment to pay off your principal and get you out of debt sooner.

Check to see if you qualify to reduce your debt instalment with our quick quiz

Repay one simplified-monthly repayment: Whenever you pay a bill to a counselling agency, you receive one statement a month. The process is much easier than juggling multiple bills from various creditors.

Accountability: If you make minimum payments on your credit cards, you will be stuck with the debt for years. But with a debt repayment plan, you’ll have a strategy for paying off the debt that helps keep you accountable.

Having lower, simpler payments and someone else to handle your creditors can be relieving.


DIY: How to make your own debt repayment plan


  1. If you want to develop a strategy, you need to see all your debt in one place. Make a list of the minimum payment, the interest rate, and the total amount you owe including credit cards, personal loans and even mortgages. You should also include any money owed to family members and friends on the list. 
  2. After that, you should rank your debts in the order you want to pay them. In general, it’s recommended to go from the smallest amount to the largest to get the momentum started. In other instances, you will save the most money by listing the debts with the highest interest rates first. It is always best to start with consumer debt, such as credit cards, since they have the highest interest rates.
  3. Your next step is to decide how much extra money you can contribute to your debt each month. It might be necessary for you to reduce your spending in other areas so that you can pay off your debt.
  4. If you want to succeed with your debt repayment plan, you should pay off the first debt on your list. Pay the minimum on all other payments while you put all extra money toward this first debt.
  5. After you have paid off your first debt, it is time to move on to the next one while continuing to pay the minimum payments on the remaining debts.
  6. After you have paid off all your debt, take a moment to congratulate yourself – you’re debt-free! Then start saving and investing for the future.


If you are over-indebted and are struggling to keep up with your debt repayments, then you could reach out to your creditors to try and negotiate lower monthly repayments. Showcase your expenses, disposable income, and your repayment plan to try and win them over.

Fair warning, doing this without professional help can be very challenging.


Can creditors refuse your debt repayment plan?

The short answer – yes. Creditors are under no obligation to accept your plan. Some of the reasons for rejection are because they don’t want to accept reduced payments or feel that you can afford to pay more. That is why we recommend enlisting the help of a professional to help negotiate reduced payment terms for you. The debt counselling process is a great way to get started.


Debt Restruct is here for you. Let us help work out a strategy for you. Many South Africans have become debt-free thanks to our assistance in reducing monthly debt instalments which help them to manage their money more effectively.

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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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