How does debt counselling work? (2024)

FAQs

How does debt counselling work? ›

Your counsellor will look at everything you owe and will negotiate with your creditors for a more affordable repayment rate and even better repayment terms. In turn, your debts may take longer to pay off, but your monthly instalments will be far more manageable.

During Debt Review, you cannot access new loans or credit cards. While this helps break the borrowing cycle, it can restrict your financial flexibility. This is a big ask for most people. And understandably so, stepping away from the dependency on credit is a big hurdle.

It is not possible to get a personal loan while still under debt review. While under debt review, you cannot access further credit in the form of a loan or credit card. This is not to try and make life difficult but rather to help you regain financial control.

Realistically, the debt review cancellation process can never take less than 2 months. Firstly, the court application must be prepared and a court date must be obtained. The court date is never likely to be less than 2 weeks away, as the court application must be served on the debt counsellor and the creditors.

Once creditors and the credit bureaus receive the certificate from the Debt Counsellor, they will remove the debt review flag from the client's name. The default listings and judgements will be removed from the client's name. Only your payment history will remain.

A debt review flag is a warning or notice that is put on your credit report when you are undergoing the debt review (debt counselling) process. This is so that creditors know not to give you any credit (loans) during this time. The reason for this is that debt review is a way of rehabilitating your finances.

The difference between debt counselling and debt review. Debt counselling is the service that a debt counsellor provides to an over-indebted South African consumer struggling with their debt, and debt review is a regulated programme that a debt counsellor will place successful debt counselling applicants under.

You will need to wait until your debt review period is over if you do decide to obtain a loan though. Reviewing your debts is a step toward financial freedom. You won't get any more unsolicited loan and credit card offers while under debt review.

Can you get a cellphone if you are under debt review? Yes, you can still get a cellphone if you are under debt review, with lay-by. While this may seem counterintuitive, it is actually quite common for people who are struggling financially to maintain access to essential communication tools like cellphones.

Can I get a consolidation loan while on debt review? ›

The short answer here is that you cannot get a loan while under debt review, for the simple reason that while under debt review your credit profile will be flagged across all credit bureaus, and this will prevent responsible lenders to approve your loan application, once they know that you are currently over-indebted ...

Will I be able to open a bank account whilst under debt review? Yes you can, you will not be penalised for being under debt review, a good idea is to also start saving the funds you paid towards your debt previously, these funds can be applied to either settling debt or in case of an emergency etc.

Many debt management plan (DMP) providers charge a fee for their services but some don't. It's important to remember that if you don't want to pay a fee, you don't have to.

If you still do not make the payment, you will be withdrawn from the debt counselling process. You will still be flagged at the credit bureaus as over-indebted and will not be able to take out any additional credit or loans. And, you will no longer benefit from lower interest rates and fees, or legal protection.

Debt counselling can help your credit score.

When you enter the debt counselling process, creditors can no longer add any further negative information to your credit profile because you will now be under the protection of the National Credit Act.

Debt review is a process that is handled by professionals to manage your debt repayments, allowing you to consolidate your debt without the need to take out further loans. Debt consolidation involves taking out a loan yourself that helps you repay all your debts.