Debt review, otherwise known as debt counselling, is a debt solution targeted at South African consumers who are over-indebted and struggling to manage their finances.
It is a process whereby you are assigned a debt counsellor (such as DebtBusters), who contacts your credit providers and negotiates lower instalments and interest rates with them on your behalf. With Debt Review, all your payments are consolidated into one monthly instalment that you can afford.
The history of debt review in South Africa
In 2007, the National Credit Regulator (NCR) introduced debt review and debt counselling under the National Credit Act (NCA) 34 of 2005.
Prior to this, the rising cost of living and interest rates were taking a toll on consumers. On top of that, consumers had no rights to enquire about the terms of conditions of taking out credit. This led to over-indebtedness due to severe misunderstanding of what they were getting themselves into. Essentially, creditors had the upper hand before debt review existed.
Other laws also made debt worse. For instance, The Usury Act (73 of 1968) and the Credit Agreements Act (75 of 1980) did not protect consumers from unethical lending practices.
The NCA replaced all of this, ensuring that consumers were empowered. The NCA prevents consumers from
Its purpose is to prevent consumers from being placed into personal administration and having to deal with the long term effects.
The process was also implemented in order to make sure that debt counsellors follow strict and ethical guidelines when assisting clients with gaining their financial well-being.
Who can apply for debt review?
There are a few qualifying criteria that need to be met in order for you debt review application to be accepted. These are:
- You must be a legal adult.
- You must be employed and earning a consistent income.
- Your debt must be from South Africa.
- If you are married in community of property, your spouse will have to agree to go under debt review too.
- If you have already been sequestered, you will not qualify.
What happens when you go under debt review in South Africa?
There are a few steps that will happen when you go into debt review - but if you’re under the guidance of a debt counsellor, everything should be smooth sailing.
The application process for debt review
Debt counsellor's assessment of the debtor's financial situation
When you get in contact with a debt counsellor, they will immediately assess your outstanding debt and your overall financial situation. This will give them full context to your level of over-indebtedness, the number of creditors you owe money to, and your income that you have available to repay the debts.
Negotiation with creditors
After they have all the facts, the debt counsellor will approach each of your creditors to let them know you are going under debt review. They will then negotiate your interest rates and repayment terms with each creditor - to ensure you are paying as little as possible while still ensuring the creditors get what they need.
Development of a debt repayment plan
Based on the first two steps, the debt counsellor will develop a restructured repayment plan. At DebtBusters, this consists of one monthly instalment that caters to all your credit providers. The client will make one, reduced payment after which the payment distribution agency will distribute the relevant amounts to each credit.
Approval and implementation of the repayment plan
Once both the creditor and the client are happy with the restructured repayment plan, it will be implemented.
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At DebtBusters, we also provide clients with a budget by which they can guide their spending each month. This ensures that there is no overspending and the monthly payment can be made.
What are the benefits of debt review?
Debt review or debt counselling benefits the over-indebted consumer in several ways.
Reduced monthly payments
The debt review process ensures that the client makes only one monthly debt repayment to a payment distribution agency, which will then pay all the clients credit providers. Interest rates and repayment terms are better, making the monthly payment much lower.
Because you will only have one payment to make, you won’t have so many things to keep track of - making your months more pleasant. On top of this, as long as you stick to your payment plan, you will not have to stress about money!
Protection against legal action
When under debt review, clients are legally protected by the National Credit Act (NCA) and creditors are no longer allowed to hassle them. If creditors approach clients under debt review, they can be sent straight to the debt counsellor, who will manage their queries.
Improved credit score
Once you start making payments, you will be in a position where your credit score is no longer being damaged. After the debt review process, you will then be able to work on fixing your score.
Financial education and counselling
Through the process of debt review, you learn to better manage your money. You gain a better understanding of budgets, savings, the best bank accounts to use and so on. After you’re done, all this knowledge will help you to stay on track if you implement the best practices that you learned.
How does DebtBusters help those in debt?
At DebtBusters, the debt review process is administered by a professional and efficient debt counsellor registered by the National Credit Regulator (NCR).
Our debt counsellors are accountable for guiding our client's step by step through the entire process and ensuring that they are provided with the best financial advice and means to solve their debt problems.
DebtBusters goes the extra mile
Our debt counsellors go the extra mile by not only assessing the clients situation, but by also ensuring that they are taught how to budget and manage their finances in order to spend accordingly and keep up to date with their debt review payments.
South African consumers who are classified as over-indebted will qualify for the viable debt solution, debt review. However, it is also required that consumers are employed and earning an income.
The debt review process explained step by step
DebtBusters debt review process can be better understood by viewing the following animation, which clearly outlines the process step-by-step:
How long will the debt review process take?
DebtBusters' debt review process is aimed at ensuring clients are debt free within a period of five years, and thereafter able to manage their finances efficiently. However, if your financial situation changes and you are able to make lump sum payments to finish the process faster, you will be allowed to do so.
Call to action
If you are over-indebted and concerned about your financial future, get in touch with DebtBusters. We can help you get it sorted.