What is debt counselling?

Many South Africans can benefit from debt counselling without knowing it. As part of the Consumer Protection Act in South Africa, debt counselling is a very effective and affordable way to protect your assets and to recover your financial situation when you are in a tight spot.

The debt counselling process is made simple for consumers: You apply online and a debt counsellor assesses your financial situation. If you are declared over committed the debt counsellor will send your creditors a letter informing them that they have to contact your debt counsellor with any queries from there on out because you are under debt review.

You are then protected from your creditors and debt collectors. Your debt counsellor will approach your credit providers within the next few days to discuss your current repayment structure. They will prove to your creditors that you cannot afford your debt and that you need your debt restructured around your living expenses (which you provide the debt counsellor).

Debt counselling makes your repayments affordable so you can breathe easily knowing that you’re able to pay back your debt. Your debt counsellor can also negotiate lowered interest rates and penalty fees if you have any. Debt review is affordable because your debt counsellor’s fees will depend on your affordability and this will be included in your single repayment to a Payment Distribution Agency every month.

Debt counselling can be an option for you if you are thinking of consolidating your debt into a single repayment but you have a bad credit record and cannot qualify for loans for consolidating debt. Poor credit scorers have a hard time getting debt consolidation loans with affordable interest rates. With debt counselling your debt will be consolidated into one repayment even if you have a poor credit record.

Some South Africans look for credit consolidation when they have bad credit by reaching for short term online loans or blacklisted personal loans but these have very high interest rates and they’re not worth the trouble of consolidating.

If you’re tempted to take on a loan to pay back existing repayments or to afford basic living expenses like food or your children’s school fees you may be over indebted and debt counselling can be the perfect way of gaining control of your finances again. Apply sooner for debt review rather than later. Once you have received a Section 129 letter from a creditor that debt cannot be included in your debt review.

Debt Counsellors in South Africa:

Debt Review Solutions

National Credit Restructuring

DebtCredit.co.za

Debt Counsellors Cape Town

What to do with debt: Three ways to be on-top of your finances again

Stick to a budget 

It’s really not a good feeling when you realize that your debt is spiralling out of control. For most people it’s hard to cut back on living expenses, but it’s still important to stick to a budget until your debt is under control again. Think of it as a debt diet: you want to learn how to live within your means so you can stay on-top of your debt.

Why not get the help of a debt counsellor? They can work out a budget and help you to stick to it. It’s also perfect for that debt diet as you cannot get loans while under debt review.

Consolidate your debt

 

You can make your debt more affordable by consolidating your credit with a debt consolidation loan. A debt consolidation loan should have lower interest rates and the repayments can also cost less than you are currently paying towards your debt every month.

When you take on a secured loan to pay back small loans, credit cards, store cards and other debts you can save on interest rates and a single debt repayment is much more manageable than numerous debts.

Get your debt restructured 

If you cannot cut back on your living expenses and you don’t qualify for a secured loan to get the full benefits of debt consolidation, you can apply to have your debt restructured.

Debt restructuring is summed up in these five steps to pay off your debt, only two of which you will have to see to:

1) Contacting a debt counsellor and providing them with your financial information so they can prove to your creditors that you are over committed and

5) paying the now affordable, restructured debt repayment every month. 

What do you think will work best for you? We’ll be happy to answer any of your questions in the comments below.