Only 32 000 out of about 70 000 consumers whose debt counsellors are either in negotiations with their creditors or who already have repayment plans in place, paid their October repayment plan instalments. This is a worrying statistic because if you default on repayments after registering for debt counselling, your creditors have the right to […]
9 April 2019
Many people who are not familiar with the debt counselling process do not see how they are able to commit to a debt restructuring programme, pay monthly fees to the debt counselling company for the ongoing service, and still save money and come out debt free at the end of it.
Well, the answer is that debt counselling is a very well designed programme which allows a fair deal to each party involved, namely, the credit providers, the consumer and the debt counsellor.
Firstly, the debt counsellor will negotiate lower interest rates and fees with credit providers, on the consumer’s behalf to ensure that the consumer can now afford their monthly instalments and the credit providers still get paid back the money they lent to the consumer.
The debt counsellor will provide a number of services to the consumer such as restructuring their budget and formulating a new financial plan, negotiating with credit providers and organising a lower, consolidated repayment amount to be distributed to the consumer’s various credit providers each month.
The debt counsellor will also provide the consumer with legal protection which will protect the consumer’s assets from being repossessed and prevents creditors from taking legal action against consumers, in fact the debt counsellor will take on all necessary communication with the credit providers on the consumer’s behalf throughout the debt counselling process.
The debt counsellor charges a fee structure for the services they provide. It is important to note that a debt counsellor will factor their fees into the consumers new budget, so they will never be charged what they cannot afford, and because the consumer now has lower interest rates and fees on their debt, they will still end up saving a significant amount of money in the long run, even when taking the debt counsellor’s fees into account.
In a consumers first month of debt counselling, they will pay a restructuring fee which will cover the administration involved in restructuring the client’s budget and debt repayment plan. In the second month, a new client will pay a sundry fee, which will cover the costs of the legal processes involved.
The restructuring fee and sundry fee will be equal to the client’s renegotiated, combined monthly debt repayment amount. This means that the client will only resume paying their creditors in month three and therefore the fees in month one and month two are affordable for the client.
From month three, DebtBusters also charges a monthly after-care fee where a small percentage of the client’s monthly repayment amount (up to a maximum of R518 incl. VAT) is charged. This is in line with the National Credit Act’s debt counselling fee guidelines. The monthly after-care fee covers the ongoing service and support a client receives throughout the debt counselling process.