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Question Debt Counselling and how it works

What happens to my bond if my unsecured debt is paid off

7 March 2024

Debt review – also known as debt counselling – is a legal process the government introduced in 2007 to help overindebted consumers ease their debt burden.

If you are overindebted, a debt counsellor can help you restructure your debt to suit your financial situation. They can negotiate with your creditors to secure lower interest rates for you, which will allow you to pay reduced monthly instalments.

DebtBusters has helped more than half a million South Africans and can also help you protect your assets so that creditors will be unable to take legal action against you. However, you need to act before your creditors do. If you are struggling to keep up with your monthly debt repayments, you may be overindebted and should consider speaking to a debt counsellor.

A debt counsellor will assess your financial situation and help you create a plan to meet your debt obligations comfortably. Make sure you include all your debt agreements in the debt counselling plan as this will help you to secure lower interest rates and instalments.

The impact of debt counselling on your home loan

Will my bond be part of my debt counselling repayments? 

According to the National Credit Act, the debt counselling programme should include all debt agreements. Aside from this being a legal requirement, you can enjoy a lower interest rate and monthly instalments if you include your bond in the debt counselling process.

READ MORE: Can I exclude bonds (home loans) from debt review?

If my unsecured debt is paid off, what happens to my bond?

Your home loan term is longer than that of your unsecured loans. That means even though you might have finished paying your unsecured debt, you may have an outstanding balance for your home loan and many years to go before you finish paying it off. However, you don’t have to stay under debt counselling because of your home loan.

As soon as your finish paying your unsecured debt, your home loan will be removed from the plan, on condition that payments are up to date, and your debt counselling fees are paid up. You can continue maintaining your home loan outside of the debt counselling process with the former interest rate and original payments.

Ensure that you make your monthly bond payments per your agreement with your creditor. Failure to do so can result in the repossession of your home.

Speak to your creditors about arranging a more affordable repayment plan before they take legal action against you.

It is also important to communicate with a DebtBusters debt counsellor if you feel you may not be able to continue paying your bond. They will assist you with budgeting tips to keep you in good financial standing.

Can I lose my house while under debt review? 

Debt counselling protects your assets. The bank will never repossess your home as long you are up to date with your payments. However, if you default on your repayments, your creditors – including your home loan provider – are allowed to take legal action against you, and you may indeed lose your house.

Can you buy a house after being under debt review?

When you complete the debt counselling programme, you will receive a clearance certificate stating that you have settled all the accounts included in your debt counselling agreement.

Your debt counsellor will submit your clearance certificate to the credit bureaus, which will remove the debt counselling flag in your credit report. Once the flag has been removed, and you don’t have any defaults or judgements against you, you can apply for any kind of credit, including a home loan.

Paying off your unsecured debt

What happens when you finish paying off unsecured debt?

Unsecured debt is not underpinned by specific assets, known as collateral – for example, a house or car.

Personal loans, credit cards, and student loans are examples of such unsecured debt.

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If you default on these debts, the lender will not be able to recover the funds from you. This increases the risk to the lender, which is why they frequently charge higher interest rates.

You can pay off your unsecured debts by:

  • Paying off your most expensive debt first (debt that has the highest interest). This is known as the ‘avalanche’ method. 
  • Paying off your least expensive debt(s) first (debt that has the lowest interest). This is known as the ‘snowball’ method. 
  • Paying more than the minimum amount owing on your debts.
  • Applying for debt counselling if you are overindebted (that is, you have no chance of repaying your debts comfortably)
  • All these methods require you to revise your spending and create a budget catering to your new repayment plan, which your debt counsellor will assist you with.

Once you have finished paying off your unsecured debt, settled your vehicle finance account, and your home loan account is up to date, you will qualify for a clearance certificate.

The certificate will be issued and submitted to the credit bureaus so they can update your credit report. Credit bureaus will remove the debt counselling flag in your credit report, and you will once again be eligible to apply for credit.

How to ensure you get a clearance certificate 

To obtain a clearance certificate, you need to pay all the accounts included in your debt counselling agreement. In addition, your home loan payments must be up to date, and your debt counselling fees must be fully paid up.

Once these conditions are met, your debt counsellor will issue you with a clearance certificate within a few days or months of completing your debt counselling programme.

The issuance of your clearance depends on the following factors:

Length of debt counselling plan: The sooner you pay off your unsecured debts, the sooner you’ll receive your clearance certificate. The time it takes to pay off your debts will depend on the amount you owe to your creditors and your monthly repayment amount.

The efficiency of your debt counsellor: Sometimes debt counsellors can take longer to issue your clearance certificate because of their workload and the efficiency of their systems. Always choose a reputable, prompt, and efficient debt counselling company such as DebtBusters.

Communication with your creditors: Debt counsellors need to confirm with your creditors that your loans are paid up and your home loan is up to date. If your creditors are taking longer to confirm your payment, they will delay the issuance of your clearance certificate.

Your debt counsellor will submit your clearance certificate to credit bureaus, which will in turn remove your “debt counselling/review” status on your credit report. This means you will be eligible for credit again, provided you meet other criteria.

READ MORE:  What to expect when getting a Clearance Certificate with Debt Counselling

How long does the debt counselling process take? 

Most consumers take up to five years to complete the debt counselling programme. However, it depends on the total amount of your debt and how much you can afford to pay each month. 

You can complete your repayments earlier if your financial situation changes and you are able to pay more than the minimum amount.

Apply for debt counselling

DebtBusters can help you manage and pay off your debt with ease. If you are ready to start the debt counselling process, click here to request a call-back from one of our consultants.


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