Debt Review South Africa 101 – Ultimate Guide

If you are reading this, you might well be in a desperate financial situation – looking at how you can get out of an ‘ouch!’ topic. Are you over-indebted to a lot of creditors and are you falling behind in your debt repayments? Very fortunately, debt review can help you and protect you and your assets. Now that you have signed a big sigh of relief that there is help out there, let’s carry on and find out more about debt review.

What is debt review?

  • Debt review is for those who literally can no longer afford to pay all their debt payments – basically, their salary is insufficient to keep up with their debts. Debt review forms part of the National Credit Act and is controlled by the National Credit Regulator (NCR).
  • Debt review consultants will be able to protect your assets and debt-paying by arranging for you an affordable and structured repayment plan. This will enable you to pay off your outstanding debt, but with a controlled, lower payment; a lump sum.
  • A debt solution business will consolidate all your debts together into one payment that you need to make every month, at a reduced interest rate, and based on your circumstances.
  • Being under debt review makes it so that all your creditors can’t take legal action against you when you can’t pay your debt anymore. The best news for you will be that your debt review company selected will negotiate reduced rates of interest from your credit provider. They will lower your overall repayment amount so you end up paying less for your debt, each month.

It might be tough, but it’s a straightforward route to gain your financial freedom 

  • Heaps of South Africans, and you might just be amongst this number, are beyond trying to gain back their financial freedom. They’re just too deep in to claw their ways out.
  • Right now, if you are in this position, and you are over-indebted [Over-indebted: The National Credit Act states: “A consumer is over-indebted if the preponderance of available information at the time a determination is made indicates that the particular consumer is or will be unable to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, having regard to that consumer’s (a) financial means, prospects and obligations; and (b) probable propensity to satisfy in a timely manner all the obligations under all the credit agreements to which the consumer is a party, as indicated by the consumer’s history of debt repayment.”], you no longer can afford to ignore it.
  • You probably have slammed down your phone many times on creditors demanding their money and threatening you with legal action. You madly think of just taking out more credit to pay things off and make a clean slate, but probably, by now, your credit record is so tarnished, no one will give your credit anymore.
  • You are in need of professional help. And fortunately for you, the law is on your side if you genuinely desperate enough about entering into debt review. You will discover real benefits – such as that guy demanding money and who you slammed the phone down on the other day from never bugging you again – he will be gone! You will get protection from demanding creditors and you will get payments that will have lower interest rates.

Are you ready to start? A debt counsellor will reach out to you

  • Debt counselling is the start of the process. You choose a debt review company (Don’t worry; we will give you three top ones later). A debt counsellor from one of these debt review companies, and who is registered with the NCR, will negotiate for you, with all your creditors. He will arrange to have the terms of each of your credit agreements extended with reduced instalments. The counsellor might even be able to persuade your creditors to reduce the interest rates on your debts so that you can afford to settle your debt in the quickest way possible.
  • Then the counsellor will structure a plan for you that consolidate your debt in one monthly payment – still allowing you to buy essential household expenses.
  • One debt expert, Matthys Potgieter, of the debt-counselling firm DebtSafe, says that debt counselling is the preferred method if you want to get out of debt; that it is chosen over sequestration or administration (explained below).
  • Look, it’s not a walk in the park this, don’t think it’s just plain sailing. It’s not. But it gives you some breathing space to start working on that huge pile of debt and teaching you to be accountable because you are now being forced to budget properly, enabling you to have a clean credit record again.

Are there any criteria I need to know about when applying for debt review?

  • First of all, you need to have a stable form of monthly income. That makes sense hey? – Seeing as you need that income to pay off your debt.
  • You also will need to be approved by the debt counsellor you have chosen as actually being over-indebted. If you don’t meet the criteria, unfortunately, you won’t be able to go into debt counselling.
  • There are fees, too, that you will need to pay; fees that are regulated by the NCR. Debt counsellors can’t just charge you their own fee, so that should make you feel good that you are paying a certified fee towards having your debt paid off.
  • Once you are on the programme, you must stick with it. You will watch as your monthly payments get reduced. You won’t be able to miss a single payment. And if you do, the agreement the debt counsellor negotiated with your creditors will fall away.
  • You will also need to realize that while under debt review, you won’t have any further access to credit until you have completed debt review and your name has been cleared. At the end of your entire process, you will get a clearance certificate. All your creditors and even the credit bureaus will remove information about your debt review and all your unpaid debt from their systems.

How long will I be on debt review?

  • The time it takes for you to be on the debt review programme will depend on how much you owe to your creditors. If you have applied for debt review, it is probably because you have a lot of debt to pay off, right, so this can usually take from about 3-5 years.
  • If you make additional payments to your creditors during your process, like you decide to take your bonus and pay off more of your debt, you can do that, and speed up paying off your debt. You are the one in control of your own finances and your debt review process. Just don’t ever skip payments or pay in less than the required amounts!
  • All your debts, except your home loan, will need to be paid off before you can exit the programme. After that, you must pay the original instalments you were paying on your home loan; no longer the reduced amount on debt review.

How much will it cost me to join debt review?

  • There is a non-refundable application and administration fee (its ±R350 plus VAT).
  • There will also be restructuring and assessment fees which amount to a maximum of around R9500 plus VAT for an individual application. This will depend on what your monthly payments are.
  • There will be legal fees you need to pay to obtain a court order.
  • Your ongoing monthly fee will be up to 8% of your repayments, to a maximum of R950 plus VAT.
  • Some people believe that you have to pay an upfront fee to join but that is just a myth. You should listen out for alarm bells ringing if you join up with an unscrupulous debt counsellor who asks for money upfront. There simply aren’t any upfront fees, because the fees you pay above form part of your monthly repayment plan.

There are always pros and cons to most things and debt review is not the exception

Let’s look at the advantages of debt review first:

  • You get one fixed monthly payment.
  • Sometimes some people have so many payments every month, that they miss out on some, or even skip them. When you miss just one, you can affect your credit report score and when you pay late, there are fees added too. Fortunately, when you go under debt review, the stress is gone. Your debt counsellor simplifies the process for you – now you only have one fixed repayment each month towards paying your debt.
  • Your payments are reduced: The aim of debt counselling is to help you pay off your debt once and for all – still leaving you enough money to cover your other expenses.
  • You are benefited with legal protection: Being under debt review, you can say goodbye to legal letters and calls from angry threatening creditors. Now you and your assets are legally protected by the NCA and your debt counsellor will take over all communication with creditors on your behalf.
  • Saved from being blacklisted: Phew, what a relief! When you are under debt review, the credit bureau won’t be able to blacklist you, because you are under the protection of the NCA. When you have completed your debt review process, a clearance certificate will go off to your creditors and the NCR will be notified and your name will be cleared of ‘being under debt review’ on their records.
  • Take a break from credit: Being under debt reviews means that you can’t take out any debit until your whole debt review process is complete and over and done with. It might sound like a disadvantage, but it’s of benefit to you in that you won’t incur any more debt. By the end of your debt review, you have a debt-free future.

The disadvantages of debt review:

  • You need to be a SA citizen and you must be over-indebted. So it’s not for everyone. If you are not over-indebted but still struggling to make ends meet, there are good management blogs on the debt review websites on how to stay on top of your finances.
  • You must be unable to meet timely financial obligations.
  • Your debt counsellor will negotiate lower interest rates for you and cheaper payment terms to help you
  • You have to be earning a steady income so unfortunately if you or your spouse isn’t employed, debt review will obviously not work for you.

Best Debt Review Companies in South Africa

  1. Debt Safe

    They are based in South Africa and have become one of the biggest of the debt review companies in the country. Can you believe that they have assisted more than 30 000 people who have become over-indebted? You can be one of those because they are dedicated to giving you reliable, compassionate, and respectful service.

  2. Debt Rescue

    Debt Rescue is another top company that is based in South Africa, with attorneys, accountants, and debt counsellors on their team. They realize what a serious legal process debt review is, which makes them the ideal group to deal with the challenges so professionally and reliably.

  3. Debt Busters

    Look on their website, another professional debt review business; you will see that they believe in giving South Africans a second chance at building a bright debt-free financial future, helping clients to take back control over their own finances through great debt management and counselling to you. See how they explain debt review, sequestration, and administration.

Final Thoughts

As we said at the beginning, it’s a tough decision going under debt review – you will be full of questions. But believe me, you will feel a weight off your shoulders when you finally fill in the online application forms to the provider of your choice; a reputable debt review firm that will walk with you through your journey from start to end. Imagine the relief, though, when 3 to 5 years later, you are clear, you have got rid of debt and you didn’t have any threats or demands coming your way!

In fact, in 3 to 5 years or so, you will have transformed your life. Bear in mind that not all debt counselling providers are created equal. One thing they all have to have in common though is to belong to the National Credit Regulator. So choose wisely, because once you commit yourself, it won’t be easy to extricate yourself from it if you want to make changes. Good debt review providers will be transparent about all the costs, they will have the professional expertise to negotiate on your behalf, staying by your side through the entire process – they will be there to provide ongoing info to you about your balances and how much you still owe; because unfortunately “Creditors have better memories than debtors.” – Benjamin Franklin.

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