×

What is debt review and how does it help over indebted consumers?

12 Apr

Debt review is a solution that is targeted at over indebted consumers who are struggling with their finances. The National Credit Act (NCA) introduced the debt rehabilitation program (debt review) to protect consumers from the damage that credit can do, especially as credit providers are so quick with handing out credit. This also gives consumers a second chance to get out of debt and the opportunity to not get blacklisted.

The debt review process also ensures that debt counsellors follow ethical guidelines when assisting clients with financial recovery.  The main purpose of debt review is to help consumers get out of debt (pay one affordable monthly instalment) and to prevent them from getting into more debt in the future. This is ensured by not allowing one to apply and receive further debt while under debt review.

As a consumer, you will need to provide your debt counsellor with your ID document and salary slip. The debt counsellor will then review the information and assess whether you are able to repay your debts on a monthly basis. It’s important to be completely transparent with your debt counsellor about all your expenses as this will help them to draw up a realistic income and expense statement to determine if you are able to repay your debts. This will be done through the process of renegotiating interest rates with credit providers and extending the debt repayment terms. We don’t extend the period if we reduce rates.

A new monthly budget and payment plan (proposal) will be drawn up that will provide some guidelines about managing your finances in order live according to your means. The debt review process ensures that the consumer only makes one debt repayment to a payment distribution agency who will then pay all the consumer’s credit providers. This reduces the stress of having to keep up to date and on top of multiple debt repayments.

When consumers are under debt review, they are legally protected by the National Credit Act (NCA) and creditors are no longer allowed to hassle them. If you are struggling to make monthly repayments and the credit providers are knocking at your door demanding their money, turning to debt review is a great option.

The Benefits of Debt Review

  • The consumer’s needs and financial security are top priority as the creditor still receives payments. Debt review looks at the interest of all parties involved as the consumer is being given the opportunity to pay back small affordable amounts that are not enveloped in interest rates while the creditor will be paid back the money, even if this takes a few years.
  • A single amount is paid over by the consumer each month. This amount is agreed to by the consumer and debt counsellor after a budget has been drawn up. The debt counsellor will take the consumer’s credit into account and negotiate with the credit providers to bring the monthly payment down to an affordable amount.
  • Debt review is a process that teaches consumers how to manage their finances correctly and responsibly so that they do not fall into another debt trap.
  • When a person is undergoing debt review, the chances of them becoming blacklisted is reduced to zero as per the passing of the National Credit Act. Being blacklisted means having a mark against your name and future credit providers will know that you were blacklisted for not making payments to creditors.