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What is Debt Counselling?
What is Debt Counselling?
Debt Counselling Explained.
Debt Counselling as a service, was introduced to provide a solution to individuals with too much debt in 2007 as part of the National Credit Act (NCA) and the purpose of Debt Counselling is to provide a strong solution to individuals who are over indebted and can not pay all their debts. Debt Review is a highly effective alternative to traditional solutions such as Administration and Sequestration when dealing with debt and over indebted individuals. Debt Counselling has the wellbeing of consumers at heart and ultimately has the purpose of rehabilitating consumers and reintroducing them back into the credit market.
Debt Counselling or Debt Review in short speaks of an individual who earns less income compared to their monthly debt or credit expenses. This individual is therefore considered over indebted and no longer credit worthy. The existing debt will in all likelihood increase based in accumulating interest placing further stress on an already burdened individual. Through a successful Debt Review application, the over indebted individual is placed on debt counselling and through the process, the individuals debt repayments are restructured in a way that all credit providers receives a reduced payment toward having all outstanding debt repaid while allowing the individual enough money for daily living expenses. This ultimately leads to the client having repaid all their debt and so becoming credit-worthy once again.
The complete Debt Counselling Process is complicated and we, here at Gauteng Debt Counselling has an outstanding track record.
If this is you, considering Debt Counselling might benefit you greatly.
The Advantages & Consequences
One of the primary benefits is that you don’t have to negotiate with the creditors yourself. A debt counsellor will do the negotiating on your behalf and settle on a repayment you can afford.
By going this route, debt counsellors advise the credit bureaus that you have applied for debt review and your profile will be updated. This means you will no longer have to deal will creditors phoning you non-stop and pursuing you with summons and judgements, which negatively affect your credit rating
You will have to pay a once-off upfront fee as well as monthly after-care fees. These fees are included within your monthly instalment, meaning if you can afford a certain amount, these fees will be calculated within the agreed amount. So no extra fees after you have agreed on an amount.
Once you start with debt review, it isn’t easy to withdraw, and you’ll need a court order stating you are no longer over-indebted or you’ll be required to settle all outstanding debt. Additionally, there will be a withdrawal fee payable to the debt consultant before a clearance certificate can be issued.
Clients can’t apply for any further debt while under debt review, so they won’t be able to use any of their credit cards, store cards, or overdraft facilities. But this also aids in the fact of debt rehabilitation, being taught again to work with your cash flow and not to be used to swipe a credit card or other credit facility anymore.
What alternatives are available other than debt review?
An alternative is to change your lifestyle, but it’s one that customers are often not willing to consider. By selling additional transferable assets, cutting down on luxury spending, as well as budgeting effectively, you will be able to pay off some debt if not all in a short timeframe. This will also help prevent the same financial problems from occurring in the future.
In most cases, going through debt review is a practical way of getting back control of your finances. Whichever option you choose, remember that getting out of debt is never a short-term endeavor and will need total commitment to succeed.