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Question Debt Counselling and how it works

Can you settle your debt without going under debt counselling?

6 June 2024

Debt counselling is a legal process introduced by the National Credit Regulator (NCR) in 2007 to help people restructure their debt to manage their repayments more easily.

The process caters for overindebted consumers who are struggling to repay their debts and/or meet their financial responsibilities, or have to take on new debt to pay their bills.

You can work out if you are overindebted by calculating your debt-to-income (DTI) ratio. 

It’s important to note that you do not qualify for debt counselling if you’re not overindebted. 

There are several alternatives to debt counselling, such as accessing funds in your home loan, if you have one, thus reducing interest costs, or finding additional sources of income to improve your financial situation. 

Debt consolidation 

What is debt consolidation?

Debt consolidation helps you to refinance your loans if you’re heavily indebted, by taking out one loan to pay off many others.

Your debts are then consolidated into a single new loan with one monthly interest rate. This makes the loan more manageable. 

You may also be granted a longer loan term, which reduces the monthly instalment – but be aware that this could mean you have to pay more interest over the life of the loan. It’s a good idea to pay off your debt as quickly as possible to avoid having to pay more interest. 

Real-life example of a debt consolidation loan 

Consider the following debt repayments across three credit accounts with three different monthly fees and debit orders, and varying interest rates:


Interest rate per year

Cost per month

Personal loan: R25,000


R1,552 over 24 months

Credit card debt: R20,000


R1,552 over 24 months

Store card: R10,000


R727.25 over 24 months

Total monthly repayment



If you consolidate the R55,000 into one loan over five years, at a rate of 22.25%, the repayment amount will be R1,857 a month. 

The total amount you will pay back will be R111,417, compared to R85,194 – that is, R55,000 plus interest over the original loan period. 

Debt consolidation can help you pay off debt immediately and improve your cash flow. However, you’ll likely pay more over the long term due to the extended loan term.<H3>Interest rates on debt consolidation loans 

Interest rates on debt consolidation loans vary. Because they’re unsecured loans, your lender may charge a high interest rate. However, if you’re already paying high interest rates, as would apply for example to a credit card balance, you may find that the total loan rate is lower than the combined rates you are currently paying.

When is debt consolidation the best option? 

Debt consolidation can help you settle your debt if you have multiple loans with high interest rates – for example, credit card debt, a personal loan, and a store account. If you are able to secure a lower interest rate than the combined interest rates you are paying – particularly if that interest rate is fixed – debt consolidation may be a good idea.

To qualify for a debt consolidation loan, you must have a good credit score, be up to date with your repayments, and be able to afford the new loan. 

If you’re overindebted, you can’t obtain a favourable interest rate, or you have no plan to address your overspending habits, debt consolidation is not a suitable solution.

Getting money through your bond 

If you have an access bond – meaning, your home loan provider has provided you with a revolving credit facility – you may be able to borrow against the value of your home in order to settle your debt.

Another option is to apply for credit based on your current property value minus the outstanding home loan balance. This is known as borrowing against the “equity” in your property. 

You may draw funds from this credit line as needed, but you will pay interest on what you use. It won’t affect your home loan balance; however, your lender will consider whether you can afford the credit before approving this facility.

Another option is to apply for a second bond, provided you have enough equity in the property. Your lender will examine your credit record and repayment history before agreeing to this solution, and it will be treated like a new bond application, and will attract the applicable fees.

Note that the interest rate on your second bond is likely to differ from your first, and you should understand the fees, loan term, and total interest payable before you sign on the dotted line. 

When is taking money out of your bond the best solution?

Accessing equity in your home can help you manage your debt. However, first find out if there will be costs or penalties if you refinance your home loan.

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Speak to a bond originator about accessing equity, and consider the new interest rate and maturity date carefully before proceeding. 

Selling assets

Selling assets is an accessible way to release additional funds. 

If your car is paid off, you may be able to sell it, along with other high-value items such as furniture, collectables, or jewellery.

Consider approaching an auction house. They may charge a fee, but potential buyers do bid for items, which can drive the prices up. Contacting specialist buyers is also a good idea if you’re selling vintage items or art.

Advertising on social media can be risky, but if you take the necessary precautions, you may be able to sell items quickly and safely. 

You can also liquidate investments such as stocks, bonds, or mutual funds, or convert a portion of these assets into cash.

Another option is to downsize your home and make a profit from the sale of your property. You can then either buy a more affordable property or rent to release additional cash.

Negotiate with lenders for debt rescheduling 

If you feel you’re likely to miss payments, contact your lender immediately. Gather all documents that will help you make your case, including your loan agreement, payment history, previous communications with your lender, and evidence of changed circumstances.

Explain your financial situation to your lender, and provide reasons why you need to reschedule your debt. Bear in mind that they will likely be more willing to help if you can prove your problems are temporary. 

The worst thing you can do is pretend the problem does not exist. 

If you propose a realistic payment plan based on your current financial situation, lenders will usually agree to or recommend an alternative payment schedule. 

Some may even offer you a grace period or “payment holiday” – an agreement that will allow you debt repayment relief for up to three months. 

Such an arrangement doesn’t mean you won’t have to pay the outstanding amount – in fact, you may have to pay additional interest on the amount owing. A payment holiday is simply a breather to give you time to catch up.

Before you skip a payment, speak to your lender about lowering your repayment amounts in terms of a new agreement. Lenders are not obliged to agree to debt rescheduling – but most are willing to approve such a request rather than lose a lifetime customer. 

Debt counselling 

If the above options are not available to you, and you are overindebted, you may consider debt counselling (also known as debt review). 

You qualify for debt counselling if you:

  1. Have an excessive debt burden, particularly unsecured debt, such as credit card debt, personal loans, or outstanding medical accounts;
  2. Have a steady source of income;
  3. Are committed to repaying your debts through a structured repayment plan, which is a legal obligation on your part; and
  4. Have not filed for bankruptcy.

One advantage of DebtBusters debt counselling is that clients’ interest rates are, on average, reduced from 21% to 3%. 

This unlocks an average of R2,000 a month for debt counselling clients. 

How does debt counselling work?

Debt counselling offers a form of consolidation, but without taking out another loan. Your debt counsellor will negotiate with creditors to reduce your interest rates and extend your payment periods. It also gives you the convenience of having a single consolidated, more affordable monthly payment, distributed to creditors on your behalf.

If you enter into a debt counselling agreement, your creditors may not approach you directly or repossess your assets.

You can’t access any new credit while under debt counselling, and a note will be placed on your credit report explaining that you’re under debt counselling. 

Debt counselling differs from debt consolidation and other measures to acquire cash, but it’s an effective process that will help you eradicate your debt. It gives you a chance to build a brighter future. 

When is debt counselling the best option? 

It’s a good idea to approach a debt counsellor if you:

  1. Have experienced a major life event, such as divorce or a medical emergency, that has led to unmanageable debt;
  2. Are missing payments, or can afford only the minimum loan repayments, which indicates that your debt is unmanageable;
  3. Have received calls or letters of demand from creditors;
  4. Are relying on new debt to serve existing debt, leading to an unsustainable debt cycle that may lead to default;
  5. Are suffering from stress, anxiety, or depression due to debt; and/or
  6. Are considering declaring bankruptcy.

If any of the above points apply, contact a registered debt counsellor immediately for an initial consultation. 

If you don’t take appropriate action, your financial standing will be affected. 

Get help 

It’s vital to be proactive about debt. Ignoring the problem will only deepen the crisis. 

DebtBusters can assess your circumstances and let you know if you qualify for debt counselling, which can greatly reduce your interest rates and unlock cash, so you don’t have to struggle to pay your bills. 

Call DebtBusters on 0861 365 914, or request a free callback.

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