Debt Counselling may sound like a scary process, but it doesn’t have to be - with the right debt counsellor backing you.
This is a real, tried and tested solution to over-indebtedness. If you follow it correctly, you can be debt free in 60 months or less.
Debt Counselling is a formal debt solution introduced by South Africa’s National Act of 2007. When you sign up, your debt counsellor will negotiate with your credit providers to lower your interest rates and get you new and better payment terms. They will also consolidate all your separate payments into one, to make it easier for you - the debt counsellor will distribute the money on your behalf.
So really, all you need to do is make one fixed monthly payment and everything will be sorted for you. But how do the payments work? Read on to find out.
How do payment amounts get decided?
When a consumer comes to DebtBusters we will go through their income and expenses and come out with a figure called the rehabilitation amount.
This rehabilitation amount is the amount you have available to pay for your debt each and every month. It is calculated taking into consideration various factors like:
- Your outstanding debt
- Your monthly income
- Your monthly expenses
Once all of this is calculated, the debt counsellor will then negotiate for better payment terms and interest rates so that the amount you need to pay back is lower.
Every month you will pay the same amount - a fixed amount - starting from the very first month. You will pay the amount to Hyphen PDA. This amount:
- In the first two months - will be used to pay for an application fee, sundry fee, and restructure fee. These are just once off though and are calculated to fit into your monthly fixed payment.
- From month three - will be distributed to your creditors and will include aftercare fees and payment distribution agency fees (DebtBusters uses Hyphen PDA).
The fixed amount will never be more than you can reasonably and realistically pay on a monthly basis.
The acceptance of your repayment plan
How likely are creditors to accept our suggested changes to your repayment plan?
Well, our acceptance rate on new repayment plans is 90%. This means the creditors have agreed to receive a lower monthly instalment, often at a lower interest rate.
This seems unreal but it isn’t. Often creditors are understanding and are happy to make arrangements to help you get your debt paid.
This is a massive benefit to you! You will be paying much lower amounts than your originally agreed upon amounts.
The importance of paying back your rehab payments
Missing your monthly payments is essentially wasting an opportunity to pay less for your debt. You could be risking all the lowered payments your debt counsellor has arranged for you.
What to do if you can't repay the full repayment amount?
It is critical to make a full payment. If you cannot make the payment, you should contact your debt counsellor immediately to advise them of this and to explain the reason for it. They will try their best to accommodate your situation. Their advice will differ on a case to case basis.
What should you do if you make a reduced payment?
It is strongly recommended to implement the following practices when making reduced payments:
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Make one payment
While you could make half the payment at one point in the month and pay the rest later in the month, this is not advisable. You should wait until you have the money to pay the full amount in that month.
In other words, if full payment will be made in the same month - but you don’t have the money on the due date - notify DebtBusters of the delay and wait till you have the full amount to make one payment. Do not make multiple payments.
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Notify DebtBusters in advance if you cannot make the full amount
If full payment cannot be made then notify DebtBusters 5 business days before the payment due date. Let us know the reason for the short payment so that we can amend your payment plan and notify the credit providers accordingly.
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Re-evaluate your spending to understand why you are not making the full amount
Take a look at your monthly budget and see whether there have been additional costs added. Can anything be removed to prevent a missed or short payment in the future?
Try to figure out what led you to being short of money so that you can avoid it.
What happens if you completely miss your repayment?
Similar to the above, if you miss one payment, your debt counsellor will contact you to see if there is a way to help. Debt counsellors understand that circumstances may change and issues may arise. Together they will try to work out a plan with you.
When you contact the debt counsellor to explain why you will be missing a payment, you will:
- Provide proof of your lack of ability to pay. In other words, you’ll have to show what took up the money you would have used to pay. For this, you can use a medical bill, receipt for vehicle maintenance and any other such documents.
- Be advised of Form 17.3 (Circumstance change) which is a notification that is sent to the credit providers to indicate unforeseen circumstances leading to your non-payment.
- Make arrangements for arrears that you incur.
If you miss 3 months of payments or more - your debt counselling contract will be terminated. This means that you will lose the renegotiated terms the debt counsellor has provided you, and you’ll have to go back to paying the original amount for each of your credit agreements. On top of that, you will no longer be protected from credit providers.
You will go through these steps:
- Your creditors will terminate your debt review agreements.
- The legal process will begin and you will be issued a Section 129 letter.
- You will receive a summons.
- There will be a warrant of execution.
If you have been retrenched, your credit life insurance will kick in until you can pay the amount on your own again.
Who is Hyphen PDA
Hyphen PDA (a registered PDA with the NCR and a member of the First Rand Group), is the payment distribution agency that DebtBusters uses.
This means that when you make your payments, it will be to Hyphen PDA and not to DebtBusters. It is Hyphen PDA who then distributes the relevant amounts amongst your creditors.
Hyphen PDA will not distribute a payment received unless it is more than 60% of what is expected. In other words, if you pay less than 60% of your fixed monthly repayment amount, they will not distribute the money to your credit providers.
What DebtBusters can do to help
Making regular payments according to the agreed amount remains your responsibility yet we do realise that certain unexpected circumstances may occur.
We will try our best to assist where possible and try to mitigate the risks but this can only be done if we are proactively made aware of the issue being experienced so that we can update the relevant financial systems and notify the credit providers accordingly.
Contact us if you have any concerns about your debt repayments
Please contact us immediately on 0861 66 33 28 if you are experiencing or likely to be experiencing any problems in the future with regard to debt repayments so that we may assist.
