You can cut your monthly credit repayments with as much as 60% through debt review. The National Credit Act, which was promulgated in 2007, gave rise to the profession of debt counselling and a much needed way for consumers to get out of debt, without risking their assets.
Rising living costs, combined with the effects of the economic slowdown, led to a situation where over 50% of the 20 million credit users in South Africa, by end of September 2013, were in arrears on at least one of their credit accounts, or had at least one judgment or negative credit record. Household-debt-to-disposable-income was the highest ever at 76% in 2013.
What the above shows is that you are not alone in the credit crunch and there is a way out of the spiralling debt cycle. Under debt review, you get the opportunity to repay your debts by consolidating the monthly repayments to all of the creditors into a single monthly repayment over a longer period, and often at a lower interest rate. During this period, you will not be able to enter into new credit agreements. This is to protect you from getting deeper into debt and to protect the creditors against irresponsible lending.
Why Debt Counselling is Beneficial
Once you are in arrears with one or two credit accounts, you will find that the creditors start to harass you with phone calls. Indeed, they often start calling the day after you have missed a payment and it can be embarrassing, especially when you are at work. Debt collectors knock at your door and you face the risk of losing your house, furniture and vehicles. The above are not easily replaceable and you want to minimise disruptions for your family.
Once you undergo debt counselling, the creditors can no longer call or harass you, and your valuables are protected against repossession. The debt counsellor will immediately notify the creditors that you are under debt counselling and will then negotiate better payment terms with the creditors, on your behalf. Once an agreement is reached, a debit order will be placed on your bank account for the monthly consolidated amount. The payment distribution agency will distribute the money to the various creditors and you will receive a monthly statement showing which companies have been paid and the exact amounts, as well as the outstanding balance.
The benefits include:
Debt counselling gives you a viable alternative to sequestration and administration. Our counsellor will assess your financial situation and determine if you are over-indebted. During this period of assessment, you will already be protected against creditors. If you are indeed over-indebted, the counsellor will restructure your budget to allow for a lower monthly consolidated instalment to all of the relevant creditors. With the new budget, you will have enough money left to pay your living costs, while your debt is also serviced.
Debts that can be included:
Debts that are excluded:
You will still be able to rent a home, have your mobile phone contracts and pay your children’s education. The only difference is that you cannot open new store accounts or purchase anything on credit. With debt counselling, you thus have minimal disruption of your life.
We do, however, recommend that you look at factors that can reduce your monthly expenses, such as gym membership and unnecessary service contracts, such as DStv. Also consider reviewing your current insurance to determine if you can get lower insurance premiums from your service provider. If not, shop around for service providers that can give you lower premiums.
Contact us for immediate and professional debt counselling assistance. We have been around since 2008, are registered with the National Credit Regulator and offer you a wide range of debt management products. We have successfully assisted over 5 000 consumers to date and have helped over 200 businesses. We also have a national panel of attorneys and can assist you anywhere in South Africa.