Debt Review is a process introduced by the Nation Credit Act in 2007 aimed at assisting over indebted consumers by restructuring their debt so that they can meet their monthly financial obligations.
Being under debt review should not be seen as a get out of jail free card & your debt is not written off.
Debt review is also commonly known as debt counselling.
We only recommend debt counselling for consumers who are in serious financial difficulty and face legal action from multiple creditors.
If you are Interested in debt counseling we’ve outlined the major points in the debt review process for you in this article.
7 Step Debt Review Process
- Find a debt counsellor, you can search the National Credit Regulator for registered debt counselors.
- Apply for debt review by filling in a Form 16. You will need to provide the counsellor with your ID Book, Pay slip, Credit Agreements & Budget of your monthly living expenses. During the first 60 days of your application to be placed under debt review ‘legal action’ may not be taken against you in respect to the debts that are under review.
- Debt Counsellor has 30 days to determine whether you are over-indebted and qualify for debt review or not.
- If you qualify for debt review the debt counsellor will crunch the numbers and work out a new budget for your living expenses & new debt repayment plan.
- Counsellor will approach your creditors with the new repayment plan if they do not agree the counsellor can approach the magistrate for a decision. Counsellor will approach credit bureaus to update your status to ‘debt review’ this is not blacklisting. It is for protection against creditors & from further debt.
- Once debt restructuring is finalized you will receive your new repayment plan, which will also be submitted to a Payment Distribution Agency. This is the company you make a single payment to on a monthly basis who then distributes the smaller payment to your creditors.
- Once you have paid up all your creditors your debt counsellor will issue you with a clearance certificate. The credit bureaus will remove your ‘debt review’ status & you will officially be debt free.
10 Debt Review Fees Explained
- Restructuring Fee up to a maximum of R6,840.00 is payable in the first month
- Application of R57.00
- Credit Check fee of R57.00
- Rejection fee of R342.00
- Monthly after-care fee equal to 5% of monthly installment up to a maximum of R456.00 for 24 Months
- Monthly after-care fee equal to 3% of monthly installment
- Legal fee of R855 for consent order
- Sundry fee equal to consumers debt rehab payment up to a maximum of R4,500.00 & minimum of R2,000.00 due in second month.
- Payment Distribution Agency equal to 3% of monthly rehab payment to the maximum of R570.00
- Withdrawal fee equal to 75% of restructuring fee should consumer choose to end debt review process
5 Cons of Debt Review
- Prolonged Debt Repayments – To restructure your debt into smaller repayments with lower rates will require paying it back over a longer period of time.
- More Interest – Although your interest % might have dropped, the repayment terms are much longer so you could land up paying more interest.
- Fees – If you are still reading this, I guess you did not get scared off by the debt reviews fees above which can be astronomical.
- Life Style Changes – To prove to the courts your willingness to repay the debt you will need to have a humble budget to meet your basic needs & debt repayments. This will require cutting back on luxuries like satellite TV.
- No More Credit – Your debt review status is reflected on your credit report & you will not qualify for any new credit until you have paid off all your debts. No short term loans, no vehicle finance, no home loans.
As we mentioned before going under debt review is not a get out of jail free card & is not for the faint hearted.
You will have to live under a strict budget & the only way to speed up the process would be to decrease your spending & make more money.
If your situation is not so severe an alternative option to debt review can to administer debt management yourself. This comes down to self-disciple & basic money management like having a monthly budget in place.
All the best from the LittleLoans Team!