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.
The National Credit Act (NCA) introduced the formal debt rehabilitation program, debt review, in order 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.
Debt review is the process whereby a debt counsellor assesses a client’s outstanding debt and implements a restructured debt repayment plan. This will be done through the process of renegotiating interest rates with credit providers in order to reduce them, as well as by extending the debt repayment terms.
A new affordable monthly budget and payment plan will be drawn up by a debt counsellor, which will provide the client with the correct guidelines and means to live off.
In addition to this, the debt review process entails that the client makes only one monthly debt repayment to a payment distribution agency, which will then pay all the clients credit providers. This reduces the stress of having to keep up to date and on top of multiple debt repayments.
Most importantly, when under debt review, clients are legally protected by the National Credit Act (NCA) and creditors are no longer allowed to hassle them.
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.
What is Debt consolidation?
Debt consolidation is a viable financial solution designed to simplify multiple debt repayments and, under some circumstances, save the debtor money. The process essentially involves taking out a single, new loan, at the lowest possible interest, to pay off multiple smaller debts. Some of the most common questions people ask those in the financial sector are:
“When are debt consolidation loans a good solution?”
“How did I end up in this financial situation?”
“How common are my financial problems? Is this just happening to me?”
How do people end up so indebted?
Marketing has us exposed to an increasing amount of items to purchase and credit methods which will allow us to do so. Now you can have everything you’ve ever wanted at, seemingly, little cost – but the debt is mounting and the bill is coming. Here are some of the things which may have been purchased on credit to push you into a tight spot:
Cell Phone contracts
As to how common this issue is and whether it’s isolated to you, consider the origin of the global recession in 2009. Over extended credit to American citizens is what began the entire situation, when people just like you in the USA realised that they could not afford to pay back their loans.
When is a debt consolidation plan a good idea?
Those who do not fully understand the intricacies of the system often state that taking out another loan to pay off previous loans doesn’t make sense – but it certainly can. If you have multiple creditors harassing you by phone (this process can be extremely unpleasant) and you want the calls to end, then a debt consolidation loan is the fastest solution. And, if it’s planned out very carefully, it can also be the most cost effective option.
What kind of consolidation loans are there?
Many financial experts will tell you to use your home loan (should you have one) due to the low interest attributed to it. Depending on your credit profile, your home loan rate is probably close to the current prime rate. This is typically much lower than the interest rate you’d score for short term loans or retail store cards. Short term loans can run anything from a 21% – 32% interest rate – which is why a debt consolidation loan on a much lower interest rate can work.
The interest rate you’ll get on this type of loan really depends on your credit score but most banks will offer this option if asked about debt consolidation loans for non-homeowners. Due to the National Credit Regulator cracking down on reckless loaning by banks, most will not even list consolidation as a service or product on offer. With proper planning and expert advice, the personal loan is a good way to proceed with a debt displacement strategy.
This can be an excellent way to get low interest loans for bad credit. You’re essentially securing the loan by attaching an asset to it, greatly reducing the risk to the lender thereby reducing your interest rate. You can attach big ticket items such as your house or car, but be certain that you’d be able to pay that loan back or those assets can be repossessed.
The debt review process involves obtaining a court order in a Magistrates Court on your behalf in order to formalise your restructured debt plan & to ensure that all credit providers are bound to acceptance of your debt repayment plan. You also do not need to attend court proceedings yourself – Randles Attorneys will represent you and appear in court on your behalf.
Randles Attorneys are also able to assist consumers with liquidations, sequestrations and legal action instituted against them by a credit provider. You can be sure of a professional and personal service from our offices.