Even before lockdown, many people were finding it difficult to meet their debt repayments and facing the prospect of defaulting.
Once you are in default, the collection and legal fees start mounting up. Debt that you were already struggling to repay could easily double as a result. You could even risk losing your car or home.
One of the options available is debt counselling where you select to go under debt review and are protected against legal action by creditors.
A debt counsellor provides a court-issued agreement stipulating the repayment plan. Consumers make one affordable payment each month to an independent Payment Distribution Agency (PDA). This in turn is distributed to the creditors as per the agreement.
Once under debt review you may not apply for any credit until all the debts, as per the court order, are settled. Once settled, the debt counsellor will issue a clearance certificate confirming that all the accounts listed under the agreement are paid up. Home loans are the exception and do not need to be fully paid up, but the payments must be up to date.
The debt counsellor must ensure that the credit bureaus receive the certificate.
While there are many satisfied customers who have completed the debt counselling process, there are just as many who have had a negative experience.
Make sure you are working with an ethical provider who is a member of the Debt Counsellors Association of South Africa or the National Debt Counsellors Association.
When working with a debt counsellor make sure they create a repayment plan that can be settled within five years. This can be done if the debt counsellor negotiates lower interest rates with the creditors.
According to the National Debt Counsellors Association, reputable debt counsellors use an industry standard called the Debt Counselling Rule Set (DCRS) that allows them to negotiate significant interesti-rate reductions on consumers’ debt.
For unsecured lending such as personal loans and credit cards, DCRS allows for renegotiation of the interest rate to as close to zero percent as possible. This is a significant saving on credit agreements that can have interest rates as high as 23%.
Debt counselling can be a great solution, but do your homework before you enter into any agreement, as once the agreement is in place, you are legally bound by it.
I have signed up for debt counselling but i am having second thoughts about it , I had only fallen behind by 60 days on one of the accounts . Although my monthly commitments were higher than my income i believe i should have tried to speak to the creditors which in this case is banks . The debt counselor send me an affidavit for me to sign which goes to court but have not signed that . What are my options
It sounds like you may have acted too soon. Read this article to understand the process and which forms you have already signed https://mayaonmoney.co.za/2019/10/when-can-you-exit-debt-review/
It may be that your only option is to prove to the magistrate that you are able to manage your debts.
Hi there, I joinee debt review 4 months ago and now my financial status has improved. I woukd like to opt out of debt review. Before I put myself I wasn’t blacklisted.
I want to cancel debt review and pay debtors myself.
you have to settle the debts under debt review before you can exit
You say “do your homework” but of what? What are the pitfalls to look out for? Isn’t debt review supposed to be a good thing? How would I know if it was bad?
excellent question which is why you must listen to the podcast which will be released today where I can to a debt counsellor about this exact question
Does going under Debt Administration mean that you won’t be granted a Visa to go to Britain for a holiday?