FAQs
What are the benefits of Debt Counselling?
- Reduced Monthly Payments: Lower monthly installments provide much-needed financial relief.
- Lower Interest Rates: Reduced interest rates save you money and help you pay off debt faster.
- Protection from Creditors: Debt Review offers legal protection from creditor harassment and collection actions.
- Improved Cash Flow: Increased disposable income allows you to better manage your daily expenses and improve your overall quality of life.
- Peace of Mind: Gaining control of your finances can significantly reduce stress and anxiety.
What is Debt Review?
Debt Review is a legal process that helps over-indebted consumers manage their debt more effectively. It involves:
- Budgeting and Financial Counseling: Working with a registered Debt Counsellor to create a realistic budget and identify areas for cost-cutting.
- Debt Restructuring: Negotiating with creditors to reduce interest rates, lower monthly payments, and extend repayment terms.
- Consolidated Payments: Making a single monthly payment to a Payment Distribution Agency (PDA), which then distributes the funds to your creditors according to the agreed-upon plan.
Why can’t I restructure my own debt repayments?
You can by all means do your own restructuring, however as registered Debt Counsellors we have been trained to help you deal with difficult credit providers. We deal with your debts in an unbiased way, as our main focus is to get you out of debt as soon as possible. We have built strong relationships with the creditors to know what they will reasonably accept and what they will not consider. One of the great things about Debt Counselling is that we negotiate a more affordable interest rate on your behalf. On average we negotiate interest rates to a low 3 % p.a., resulting in saving you thousands of your hard-earned money in interest charges.
When Should You Consider Debt Review?
You may be considered over-indebted if you:
- Frequently use credit cards and overdrafts to cover essential expenses.
- Borrow money to pay off other debts.
- Skip payments on some accounts to pay others.
- Cannot consistently pay your bills on time.
- Receive frequent letters and summonses from creditors.
- Are considering sequestration.
- Have judgments granted against you.
How do you know you need a debt counsellor?
When you are suffering under the yoke of over-indebtedness, then you need a debt counsellor.
You considered to be over-indebted, if the money you have available after paying all your essential expenses is not enough to pay all your debt obligations in full each month.
Some indicators of over-indebtedness:-
You use your credit card and overdraft facilities to pay your monthly debt obligations, buy food and transport etc. Credit Cards and overdrafts is to be used for emergency purchases, not your day to day living expenses.
- You borrow money to pay other debt obligations.
- You skip payments on some accounts in order to pay others because you cannot keep up.
- You cannot pay your bills at the end of the month.
- You receive letters and summonses from creditors and lawyers.
- You are considering sequestration.
- You have judgments granted against you.
How does one avoid becoming over-indebted?
Avoid getting more debt, rather downgrade and change your lifestyle! It is important to remember that a change in lifestyle is the first step in creating a better environment for yourself as a consumer in these challenging times.
You will need to cut on some things and make adjustments in order to stay afloat.
A small list of things you need to cut or adjust:
- Alcohol
- Cigarettes
- Entertainment
- Club membership
- DSTV
- Holiday clubs
- Gambling
- Where possible use public transport
You will find that by cutting these items out of your budget, you would increase your monthly cashflow. You then have the option to either save the extra money or pay more on your accounts.
How does the Debt Counsellor collect their payments / fees?
At Debt Check we collect all fees via a registered Payment Distributing Agency (PDA). The PDA would debit your account each month with one instalment and distribute funds to all creditors as stipulated in the repayment plan. Our fees are regulated by the National Credit Regulator (NCR). The stipulated amount for Debt Counselling fees works as follows:
- An Application fee of R 350.
- A Restructuring fee equal to the first instalment of the debt re-arrangement plan with a maximum of R 8 000.
- A monthly After-care fee of 5% of the monthly instalment of the debt re-arrangement plan with a maximum of R450.
- A legal fee of R 1 100 in the second month for the debt counsellor to obtain a consent order when all credit providers consented to the debt re-arrangement.
How does Debt Review protect me?
- Asset Protection: During the Debt Review process, your assets are generally protected from legal action by creditors, as long as you make your agreed-upon monthly payments consistently.
- Legal Protection: Debt Review provides legal protection from creditor harassment and collection attempts
What Happens If I have existing Legal action?
If you have existing legal action against you, it may not be possible to include those accounts in the Debt Review process. However, your Debt Counsellor will work to negotiate a reasonable payment plan with the relevant creditors.
Does it mean I’m declared insolvent if I apply for Debt Review?
No, once you apply for Debt Review we will “flag” your name with all Credit Bureau’s with an indicator that you cannot get any further credit while your accounts are being restructured through the Debt Review process. Once your debt obligations are settled, we will lift this flag by means of issuing you with a Clearance Certificate. It is for this reason, that once you applied for Debt Review it is not an act of insolvency as opposed to applying for Sequestration or Administration. Your name is not blacklisted, there is merely an indication to all creditors that you’ve applied and they should not give you further credit while we trying to settle your existing debt.
Is Debt Review the same as Insolvency?
No. Debt Review is not the same as insolvency (such as sequestration or administration). Insolvency proceedings have more severe consequences, such as the potential loss of assets and a longer-lasting impact on your credit score.
Payment Allocations – How it Works?
- Prioritization: Secured debts, such as home loans and vehicle finance, are typically prioritized in the payment allocation.
- Unsecured Debt Settlement: The remaining unsecured debts (credit cards, personal loans, etc.) must be settled within a maximum of 60 months (5 years) as per the National Credit Act.
- Interest Rate Reduction: Debt Counsellors negotiate with creditors to significantly reduce interest rates, typically to an average of 3% per annum. This significantly reduces the overall cost of borrowing and accelerates debt repayment.
How Does Debt Counselling Impact My Credit Score?
Debt Review will be reflected on your credit report. However, successfully completing the program and making consistent payments can actually help improve your credit score over time.
How Much Does Debt Counselling Cost?
Debt Counselling fees are regulated by the National Credit Regulator (NCR). Typical fees include:
- Application Fee: A one-time fee for processing your application
- Restructuring Fee: A fee for developing and implementing your debt restructuring plan.
- Monthly After-Care Fee: A monthly fee for ongoing support and monitoring.
- Legal Fees: Fees for legal representation during the court process.
How Can I Avoid Over-Indebtedness?
- Create a Budget: Track your income and expenses to identify areas where you can cut back.
- Prioritize Essential Expenses: Ensure you can afford essential living expenses like rent, utilities, and groceries before making discretionary purchases.
- Reduce Unnecessary Spending: Cut back on non-essential expenses such as entertainment, dining out, and subscriptions.
- Avoid Impulse Purchases: Think carefully before making any purchases and avoid impulsive spending.
- Limit Credit Card Use: Use credit cards responsibly and pay off your balance in full each month whenever possible.
Does it mean I’m declared insolvent if I apply for Debt Review?
No, applying for Debt Review does not automatically declare you insolvent.
- Debt Review is a formal process that helps you manage your debt more effectively.
- It involves a “flag” being placed on your credit report, indicating to other creditors that you are currently under Debt Review. This prevents you from incurring further debt during this period.
- Upon successful completion of the Debt Review program and settlement of your debts, the “flag” is removed, and you can regain access to credit.
- This differs significantly from insolvency procedures like sequestration or administration, which have more serious consequences for your creditworthiness.
What is an administration order?
- An Administration Order is a legal process for individuals with debts not exceeding R50,000.
- It involves a court-appointed administrator who oversees the distribution of your income among your creditors.
- An Administration Order remains on your credit report for 10 years or until it is rescinded.
What is a judgment?
- A judgment is a court order that compels you to repay a debt.
- Creditors obtain a judgment through legal proceedings, which typically involve issuing a summons to the debtor.
- Failing to appear in court or comply with the court order can lead to a judgment being granted against you.
- Judgments remain on your credit report for 30 years or until they are fully paid.
What is a rescinded judgment?
- A rescinded judgment is a judgment that has been officially removed from your credit report.
- This can occur due to various reasons, including:
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- Errors in the original judgment.
- Irregularities in the legal proceedings.
- Full payment of the debt.
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What is default data?
- Default data refers to information reported to credit bureaus by credit providers regarding missed or late payments on accounts.
- Different types of default data have varying retention periods:
- Minor defaults (e.g., delinquent, slow paying): Recorded for 1 year.
- Serious defaults (e.g., default, handed over for collection, legal action): Recorded for 2 years.
What are legal notices?
- A Section 129 Notice is a formal notification from a creditor indicating their intention to take legal action against you for non-payment.
- It is typically issued after multiple attempts by the creditor to resolve the outstanding debt through negotiation or payment arrangements.
- Upon receiving a Section 129 Notice, you have 10 days to contact a Debt Counsellor to explore alternative solutions, such as a debt restructuring plan, to avoid further legal action.
Disclaimer: This information is for general guidance only and does not constitute legal or financial advice.
Contact Us: If you’re struggling with debt, contact Debt Check for a free consultation. Our experienced Debt Counsellors can assess your situation and guide you towards the best solution for your financial needs.
Call us at 0860 017 454 or complete the form above for a free call back.
