The benefits of debt settlement

Has your financial situation changed since you went under debt counselling? Have you unexpectedly received a lump sum of money, such as a 13th cheque, a bonus, an inheritance or a tax refund?

These are good things, but they come with responsibility. It could be tempting to use the cash to spoil yourself. However, if you are under debt counselling, there is a much more practical way to spend it, and one that will lead you closer to a secure financial future.

That option is debt settlement. It helps you reach the end of the debt counselling process faster, and it comes with other benefits too. We explain them in this article.

How should you spend extra money?

Where the money goes is a tricky decision that will depend on your personal circumstances.

Saving is a great option, especially if you do not yet have an emergency fund to cover unexpected costs. If you already have money going into a savings account every month, it may be less urgent. If long-term saving is on your mind, see how much money you should save for retirement.

Putting the money towards paying off your debt is another great option, and often the one that saves you the most. Every rand you settle now is a rand that stops attracting interest and fees.

Remember that spending the money might bring you some immediate gratification, but it may not be the most beneficial option in the long run.

What is debt settlement?

Debt settlement is a solution for DebtBusters clients who want to pay extra towards their outstanding debt so they can pay it off faster. You can settle one account, several accounts or all of your debt, in part or in full. Because you are offering to pay a lump sum now, credit providers will often accept a discounted amount to close the account, which means part of what you owe is written off.

We advise clients to let us know when their financial circumstances improve. Once an account is settled, the money that was going towards it each month in your repayment plan is redistributed to your other accounts, so they are paid off faster too.

Find out more about the DebtBusters debt settlement service.

How debt settlement works with DebtBusters

1. Tell us about your lump sum. Email or call the DebtBusters settlement team with the amount you have available.

2. Decide which debts to settle first. We help you prioritise, usually starting with the accounts that charge the most interest or the small balances you can clear completely.

3. We negotiate with your credit providers. Our settlement team negotiates with each credit provider for the best possible discount. You can read more about negotiating with creditors in our guide.

4. You pay the agreed settlement amount. The lump sum goes towards the accounts and amounts agreed with your credit providers.

5. You receive a full breakdown. We send you a detailed breakdown of the settlements, discounts and overall savings achieved.

The benefits of debt settlement

Settling your debt can make your life easier in several ways.

1. A quicker repayment period

Paying extra towards your debt reduces what you owe faster, which means you finish paying sooner. Under debt counselling, that brings forward the day your debt counsellor can issue your clearance certificate and you exit the process.

2. Paying less in total

Settling your debt early can mean paying less than you originally owed. Credit providers often accept a discounted amount in exchange for a lump sum, and DebtBusters clients can save up to 25% on what they owe. The discount you receive depends on your personal circumstances and on each credit provider.

Settling also stops future interest and fees on every account you close. The sooner a balance is cleared, the less interest it has time to add.

3. A better credit score over time

Paying back your debts faster lets you start improving your credit score sooner. As balances come down and accounts are settled, your credit report reflects less outstanding debt.

While you are under debt counselling, your credit report carries a debt review flag. It is removed once all your restructured debt is paid and your debt counsellor issues a clearance certificate, as explained in what happens once debt review is over. Credit bureaus can take a few weeks to a couple of months to update your records after they receive the certificate, so settling a lump sum early brings that day closer.

Read more about how debt counselling affects your credit score, and once you have exited, use our guide on how to rebuild your credit score.

4. Peace of mind as you become debt free

One of the biggest benefits is moving closer to financial freedom. Seeing the amount you owe drop is a great feeling, and it takes a huge weight off your shoulders. That peace of mind frees up mental space for the other things in your life.

Need debt counselling or consolidation?

Explore DebtBusters' solutions for reducing your interest rates and unlocking cash.

Find out more

The benefits of using DebtBusters to settle debt

Get discounts on what you owe

Did you know that you can get a discount if you settle all or part of your debt through DebtBusters? Our debt settlement department manages a fair settlement process and negotiates with your credit providers for the best possible discount. Clients can save up to 25% on what they owe.

Get financial advice and planning

DebtBusters will also help you prioritise which debts to settle first, and you will receive a detailed breakdown of the settlements, discounts and overall savings achieved.

How else can DebtBusters help you manage money?

DebtBusters offers a range of debt management solutions, including:

1. Debt counselling

Debt counselling is a legal debt management solution under the National Credit Act that helps you get back on track. We lower your interest rates, consolidate your debt into one monthly payment and extend payment terms to make paying easier.

2. Debt consolidation

Debt consolidation simplifies your financial life by combining all your debt repayments into one. Depending on your situation, this can be done through a consolidation loan or through restructuring under debt counselling, with one lower, affordable instalment and a longer payment term.

3. Credit monitoring

Credit monitoring is a free service that lets you keep track of your credit report, view your credit score and track your payments as often as you like. It gives you a deeper understanding of your financial situation, so you can make better decisions for your future.

Frequently asked questions

What is debt settlement?

Debt settlement is when you pay off all or part of a debt early with a lump sum, often at a discount negotiated with the credit provider. DebtBusters clients under debt counselling can use the DebtBusters settlement team to negotiate these discounts on their behalf.

Can I settle my debt while I am under debt counselling?

Yes. If you receive a lump sum while under debt counselling, you can use it to settle one or more accounts in part or in full. Let DebtBusters know, and the settlement team will advise which debts to settle first and negotiate with your credit providers.

How much can I save by settling my debt?

According to DebtBusters, clients can save up to 25% on what they owe when settling through its settlement team. The actual discount depends on your circumstances and on each credit provider. Settling also stops future interest and fees on the accounts you close.

Will settling my debt improve my credit score?

Settling debt reduces what you owe, which helps your credit score over time. If you are under debt counselling, the debt review flag stays on your credit report until all restructured debt is paid and your debt counsellor issues a clearance certificate.

Do I have to settle all my debt at once?

No. You can settle a single account, several accounts or your full balance. When one account is settled, the money that was going towards it in your monthly repayment plan goes to your other accounts, so they are paid off faster.

How do I start the debt settlement process with DebtBusters?

Email debtsettlement@debtbusters.co.za or call 086 999 0606 with details of the lump sum you have available. The DebtBusters settlement team will explain your options and negotiate with your credit providers.

Settle your debt today

Using a lump sum to settle all or part of your debt saves you on monthly interest and administration fees, and frees up cash flow. It also gives you peace of mind, knowing that you are debt free or one step closer to it.

If you receive a lump sum and want to settle part or all of your debt, email debtsettlement@debtbusters.co.za or call 086 999 0606. You can also read more about our debt settlement service.