Many people don’t pay their debt with the hope that it will be prescribed, and they’ll no longer be under any obligation to pay it. However, waiting for your debt to prescribe reflects badly on you. It shows that you’re irresponsible with your debt and you’re not to be trusted by creditors.
Debt takes time to be prescribed, depending on the type of debt it is. Government loans take up to 15 years, personal loans take up to three years, and home loans take up to 30 years. Even when the debt has reached its prescription date, there’s still other criteria that must be met before it’s cancelled:
- Your creditors mustn’t have tried to contact you or you mustn’t have acknowledged the debt.
- You mustn’t have paid some of the debt or have promised to pay the debt.
- You mustn’t have received any summons from your creditors.
If you’ve done any of the above, you’re still liable for the debt. The longer you wait to pay it, the more the debt amount will increase, and your assets may be repossessed. In addition to this, your credit score will drop, making it harder for you to obtain credit. You’ll become high-risk to creditors and even if you manage to obtain credit, you’ll pay higher interest.
READ MORE: What is prescribed debt?
What can you do instead?
If you’re overwhelmed by your debt, don’t just wish it away. Start taking steps to ensure that you become debt-free. Debt counselling is one of the processes that will help you lift your debt burden. This programme was in introduced in 2007 by the NCR (National Credit Regulator) to help overindebted consumers pay their debt.
How does it work?
When you undergo debt counselling, your debt will be consolidated so that you pay one instalment instead of multiple instalments. Your debt counsellor will negotiate lower interest rates with your creditors. This way you’ll pay reduced instalments and you won’t have creditors hounding you. If creditors want to communicate with you, they’ll have to do so through your debt counsellor.
While you’re under debt counselling, you won’t be allowed to apply for credit. Your profile in the credit bureaus will be ‘flagged’. If lenders grant you credit while you’re under debt counselling, they’ll be charged for reckless lending. However, being part of the process will help you unlock cash that you can use for day-to-day expenses.
Debt counselling can take up to five years, depending on the amount of debt you have. This process will help you retain your assets such as your car and house.
After paying all of your debt as per your contract with the debt counsellor, you’ll be given a Clearance Certificate – which is proof that you’ve paid all the outstanding debt. The ‘flag’ will be lifted and you’ll once again become credit active.
How do you apply for debt counselling?
To apply for debt counselling you’ll need to provide payslips, a copy of your ID, bank statements, a list of your expenses, and credit obligations. If you are married in Community of Property (COP), you will also need to obtain the consent of your spouse.