February 18, 2007 Edition 1 Edwin Naidu Three months before new credit laws aimed at curbing reckless lending come into effect, debt-laden South Africans are struggling to keep up with bond repayments, car installments and credit card bills as interest rates start to bite. The National Credit Regulator last week began training debt counsellors so […]
22 May 2015
As the South African economy is going through testing times, with increases in electricity, petrol and food costs, people’s incomes have lost its purchasing power, leading to high reliance on credit for day to day consumption. This has tipped many consumers over the financial edge and more and more consumers are turning to debt counselling to help them manage their finances.
Why can Debt Counselling help you manage your finances?
Debt counselling is revolutionary process, assisting consumers who are struggling with their finances, with the aim of helping them manage their debt in an affordable way. With debt counselling, consumers who were previously defaulting on their monthly debt repayments are able to make sure that their credit providers receive their payments on time, every month. Here is all you need to know about debt counselling and how it works.
Debt counselling summarised
- As a formal and structured process, debt counselling is regulated by the National Credit Act (NCA).
- It is a legal process and you will receive legal protection. The National Credit Act (NCA) covers the Debt Counselling Process in Section 86 of the Act, as a tool to protect and help defaulting consumers to restructure their debt repayments in order to avoid further defaulting on credit obligations.
- Your debt counsellor will negotiate with your credit providers and propose new payment terms that is more affordable to you.
- Instead of making multiple payments to all the different credit providers you owe, you make one fixed payment. The payment then gets distributed amongst your credit providers.
- Once all your unsecured debt is repaid, you receive a clearance certificate indicating that you are debt fee.
Why can you not take out further credit when under debt counselling?
The idea behind debt counselling is to get you debt free. This means that you would not have access to further credit this would not be in your best interest to do so. If you were able to get access to further credit, it would only worsen your already difficult financial situation.
Life after debt counselling
One of the most frequently asked questions by consumers looking to apply for debt counselling is “when I am done paying, will I be able to regain access to credit?” According to the NCA when you have paid up your unsecured debt, a clearance certificate should be sent by the debt counsellor in order to make sure that you are declared debt free. The credit bureau updates your credit records and the credit record becomes cleared, as if you’ve never had credit before. Thereafter you can start building your credit score again to get a healthy credit score, which would allow you to qualify for credit, including vehicle finance and home loans.
Debt counselling is a long-term debt solution
Debt counselling is a long-term solution for someone who is over indebted and should not be seen as a quick way to get out of debt. It requires commitment to the process and to becoming rid of your debt. With growing numbers in debt counselling applications, some opportunities are arising in terms of spreading out financial education, changing people’s lives and inducing a saving mind set which will help you to manage your income and reduce reliance on credit.
If you are unable to manage your debts or pay your creditors on time because you can’t afford your debt repayments, DebtBusters can help you take back control of your financial problems. Call 086 999 06 06 and speak to debt counsellor today!