DebtBusters does not recommend that you exclude your home loan from the debt review process.
Many South African consumers are under the impression that excluding home loans from their debt review will help prevent them from losing their homes. However, including it is actually a more effective way of keeping the home secure.
This is because the debt counselling process includes benefits like the protection of assets. As such, The National Credit Act stipulates that all credit agreements be included in the debt counselling process.
In addition, your home loan can revert to its original form once your unsecured debt is repaid at the end of your debt counselling journey.
Is it possible to exclude your home loan from debt review?
In a conversation with News24, Head of DebtBusters - Benay Sager - said, “Apart from it being legally not possible for the consumer to voluntarily "remove'' a particular account from debt counselling, it is also not advisable because the consumer would no longer enjoy the lower monthly payments and lower interest rates.
He added, “reapplying for a home loan or re-mortgaging as it is commonly known is not a free exercise and would require applying for a new loan which a consumer under debt review cannot legally do.”
Why your home loan should be part of the debt review process
The National Credit Act implemented the inclusion of your home loan in the debt review process, to assist consumers with keeping their homes.
The NCA requires that all debt agreements are included in the debt review. When under debt counselling it is best to include your home loan as a defined debt repayment.
The debt repayment should either be equal to or approximately 80% of the contractual repayment. This would extend the repayment terms by 20%, making the monthly debt repayment an affordable amount. In other words, this means you will be paying a bit
Who is the National Credit Regulator (NCR) and what is their role?
The National Credit Regulator (NCR) is an agency, created by the South African government, that serves to oversee the credit industry in the country. It was established as a result of the implementation of the National Credit Act (NCA) 34 of 2005.
The job of the NCR is to enforce countrywide compliance with the act. They also carry out education, research, policy development, registration of industry participants, and investigation of complaints.
In terms of debt counselling, the NCR is there to ensure that consumers are protected. They ensure that you, as the consumer, are being given sound advice from registered professionals and are not being taken advantage of.
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Can I get a home loan whilst under debt review?
You will not be approved for any sort of credit while under debt review, this includes home loans.
This is one of the terms of debt counselling and has been put in place to ensure that you are protected from acquiring additional debt and thus getting yourself into further financial trouble before getting your original active accounts paid up.
What can debt review do to help your debt situation?
Find out if you have been a victim of reckless lending
Debt counsellors will assess your credit agreements and determine whether you have been a victim of reckless lending.
If a creditor provides you with credit without doing a thorough financial assessment to ensure that you are able to afford more credit - then they have recklessly lended to you.
In the event that credit has been recklessly lent to a consumer, a court can be approached in order to declare the debt as reckless and the repayment of that debt will be written off. This will ensure that the client is placed in a better financial position and increase the affordability of their debt.
Reduce your monthly interest rates
Under debt review, your interest rates on all current debt repayments will be reduced to make payments more affordable and easy for you.
Help you with a monthly budget and spending plan
Debt counsellors will efficiently review your living expenses and financial situation by drawing up an affordable monthly budget and making sure that you have made the maximum amount of your funds available for debt review.
How do creditors see debt review?
Often people assume that creditors see debt review as a negative thing - that it makes them think the consumer is untrustworthy and financially unreliable. People may also believe that creditors are against debt review and don’t make it easy to re-negotiate interest rates. However, the opposite is true.
Going under debt review shows that you are responsible and are willing to take action to remedy difficult situations that you find yourself in. On top of that, credit providers know that debt review means the consumer will be making structured repayments every month.
This gives credit providers peace of mind, as they will know that a debt counsellor is contributing the consumers maximum amount towards settling their debt.
Call to action
For more information on Debt Counselling and DebtBusters contact a debt counsellor on 086 999 0606. With these tips in mind, as well as by not excluding your home loan from your debt review, you will be debt free and stress free in no time.
If you are struggling to pay your debt, contact us for assistance