Another loan vs. debt counselling

16 January 2019

Many people in South Africa try to solve their debt problems with more debt. It is a common misconception that if you cannot afford to pay off a loan, the solution is to take out another loan to cover it.

This, however, will lead you to an even worse off financial situation, as the more loans you take out, the more money you will owe and the more interest and fees you will be charged. If you are struggling to keep up with your debt repayments, taking out more credit will only worsen your situation, as the debt will continue to accumulate and as the situation begins to spiral more and more out of control, your creditors may begin to take legal action against you.

Debt counselling, on the other hand, is a process of consolidating your debt without taking out another loan. Your existing debt is restructured to a single, affordable amount and you will be working towards becoming debt free by paying this restructured instalment each month. A debt counsellor will negotiate lower interest rates and extended payment terms with your creditors, and will also ensure that you receive legal protection.

Going under debt counselling will allow you to be fully committed and focussed on paying off your debt and becoming debt free. You will be paying a lower instalment each month, and therefore will have enough disposable income to cover your living expenses, meaning there is no need to take out more credit to assist with cash flow.

The debt counselling solution comes with an array of benefits, the best of which are highlighted below:

  • Your debt counsellor will negotiate lower interest rates and fees on your debt with your various credit providers, on your behalf. They will also request that the payment terms be extended. This means that you will pay a combined, lower monthly instalment and have enough disposable income to cover your living expenses.
  • Under debt counselling, you will also be provided with legal protection from your creditors. This means that you will no longer receive unpleasant calls from your creditors as your debt counsellor will handle all formal communication with your credit providers.
  • As part of the legal protection you will receive, your assets will be protected from repossession, meaning that you will no longer have to worry about losing your house or vehicle.
  • You will not be allowed to apply for new credit, meaning that you will no longer be at risk of getting into deeper debt, and can fully focus on becoming debt free.

Once you have paid up all your debt obligations, you will receive a clearance certificate stating that you are officially debt free. Your credit record will be cleared and you will have the opportunity to start afresh and build up a healthy credit score.

For more info, email us on info@debtbusters.co.za or phone 086 999 0606.