More FAQs

There is no difference between debt review and debt counselling. They are used interchangeably (as you will see in these expert crafted FAQs).

As long as you maintain the agreed monthly payment and stick to the debt counselling payment plan, creditors may not change the terms negotiated and agreed.

Debt Counselling fees are listed in a guideline issued by the National Credit Regulator (NCR).

It depends. If you have signed an antenuptial contract before your marriage in the presence of an attorney, then that means you are married out of community of property and your debt counselling journey does not have to have any impact on your spouse (your spouse may still choose to apply alongside you but they do not have to).

Must the Non-Debtor partner apply for debt review?

Yes, if married in Community of Property even if the non-debtor partner is not in debt.

Must the spouse apply for debt counselling too? 

If you are married in community of property, the answer is yes.

How does debt review work when both partners apply?

Both partners must disclose their income and expenses (same as when they apply for a loan). The debt counsellor will then create a budget and propose a debt repayment plan that is affordable and sustainable for both partners. This plan will include all the couple’s total debts, including joint debts and individual debts.

What are the advantages and disadvantages of debt review (for a couple)?

Advantages:

• Reduced monthly debt payment
• A single affordable monthly payment.
• Protection from legal action and repossession of assets.
• Peace of mind that you are dealing with your debt.
• The opportunity to start afresh and borrow again once debt counselling is completed.
• An improved credit score in the long term (helping reduce cost of borrowing in the future).

Disadvantages:

• Initial dip in credit score (as creditors do not get paid for initial few months – creditors know this and they are okay with it!).
• No access to existing or new to credit while in debt counselling (cannot use credit or store cards).
• It could take a few years to complete debt counselling.

Your debt counsellor is there to talk you through the advantages and disadvantages.

According to the NCA (National Credit Act), you cannot exclude an account from the debt review process. It is also not a good idea to exclude the home loan as you would not enjoy the benefit of lower monthly payments and lower interest rates.

However, you do not need to be in debt counselling for the entire duration of your home loan payment (which could be 20 years or more!). Debt counselling is considered “complete” once all non-home loan debt has been repaid.

Including your home in the process protects it and once debt counselling is completed,  you can revert your home loan to its original repayment terms. I.e. your home loan does not have to be fully paid up to get clearance from your debt counselling plan, it must just be up to date.

You cannot get access to new or existing credit while in debt review, including home loans or advances against equity in your property. This is one of the conditions of debt counselling, the purpose being to protect you from acquiring additional debt before settling your active accounts are in order.

Once you have successfully completed your debt counselling plan and received your clearance certificate, you can become credit active again.

Yes, but be sure to advise the debt counsellor upfront otherwise negotiations can be derailed when it comes to light. In some cases, accounts with judgements can be included in debt counselling.

As a general rule, the debt counsellor can source most credit-related information but always be open and honest about your financial situation so that they can do their best for you.

The term debt consolidation is often confused and used interchangeably with the term consolidation loan.

A consolidation loan is a large loan (usually in excess of R150,000 or more) you borrow from a lender to repay back your existing loans.

In a consolidation loan:

• All your debts are combined, and a new loan is raised to cover the total debt.
• Often such a new consolidation loan has higher interest rate than all your existing loans
• You will not enjoy the advantage of a planned budget or a reduced interest rate (you will most likely pay a higher interest rate), often worsening your situation.
• You need to settle your credit accounts at the different creditors yourself to ensure you only pay back the one, bigger loan.
• For a consolidation loan to be effective, you need to make sure that you can afford the monthly repayment which can only be realistically achieved if you get a lower interest rate (which is unlikely).
• If you have missed payments or have legal action taken against you by creditors, the chances of getting a consolidation loan are slim.

Debt consolidation

Debt consolidation is consolidation of debt repayments into single payment amount for you to repay back your loan. Interest rates are not negotiated in this instance, so you pay at your normal interest rates. Your repayment term also does not change.

Debt counselling

• Legal process conducted by a debt counsellor (appointed by you) in collaboration with all your lenders.
• Could take anywhere from a few months to a few years: Length depends on size of your debt and how much you can afford to pay back to your creditors each month.
•  All your debt repayments are combined into a single payment, made via a Payment Distribution Agent to your creditors.
• Your interest rates are negotiated with your lender(s), in most cases resulting in significantly reduced interest rate.
• Your timeline to repay your loans is extended, resulting in improved cash-flow.
• While in debt review, your assets are protected.
• Note that if you have judgements on your credit report, usually the accounts with judgements cannot be included in debt counselling but will need to be paid outside of the debt counselling plan.

The choice depends on your personal circumstances. Make sure that you consult with financial experts who understand the real differences, nuances, and dynamics so that your choice results in no further setbacks but rather, improves your financial situation.

The most important thing to remember is you are paying back your own debt while in debt counselling. Therefore, missing debt payments while in debt counselling is the same as missing debt payments outside of debt counselling: it is best to make arrangements to make up the missed payment. If this payment is not “caught up,” then it may result in that account being removed from the debt counselling plan, which means you would need to pay towards that account with the original amount, interest rate, and term. In other words, you may lose the benefit of reduced payments in debt counselling if you miss payments. Should you struggle to make your monthly payment or you know will not make a payment on time, rather contact your debt counsellor immediately.

Absolutely. Debt counselling is part of the National Credit Act (NCA) and is supported by all players in the industry, including creditors, credit bureaus, debt counsellors, Payment Distribution Agencies, and of course the National Credit Regulator (NCR). Choosing debt counselling shows the creditors that you are not running away from paying back your debt, and that you have taken the bold and responsible step to repay back your debt on your own terms.

No, creditors are legally required to work with your debt counsellor directly and are not meant to contact you directly about payment arrangements. If they do contact you it is most likely because:
• It is about something other than payments.
• It’s an administrative glitch.
• They’ve sold their book and the information has not been captured yet.

Do not panic and never commit to any payment plan. Keep or note all communications made to you by the creditor and contact your debt counsellor, especially if they continue to press and harass you.

The answer to this question is: It depends on your financial circumstances.

Normally debt counselling is completed when you have paid back all your debt excluding home loan debt.

However, if your financial circumstances have changed for the better (usually this means your income has increased), you can pay more each month and reduce your debt counselling timeline.

If you have received a lump sum payment, you can similarly pay into your debt counselling and reduce your debt counselling time.

If your income has increased significantly and you can demonstrate that your income is now larger than your expenses and original debt repayment amounts combined, then you can make a new Magistrate’s court application to show you are “no longer overindebted”. This means you can prove in a Magistrate court that you can manage your debt repayments at the original (pre debt-counselling) amounts on your own. This action comes with attorney or legal fees which are not covered by your debt review, and it is best to consult with your debt counsellor about the process.

You may contract to rent property provided that the monthly rental amount is budgeted for in your debt review plan.

You may continue to rent property or sign a new rental agreement provided that the monthly rental amount is budgeted for in your debt review plan.

Your debt counsellor can provide a letter for the letting agent or landlord indicating that the amount needed for the rent payment is available and that you are in good standing with debt review payments. Most letting agents will accept this.

Some employers, especially those in financial services industry, may do credit checks and see that you are in debt counselling. They may use this information as an input in their hiring decisions.

In reality, debt counselling is undertaken by responsible individuals who want to honour their debt repayments. Hopefully, prospective employers will view you as such instead of judging you poorly.

Rather than judge you poorly, you will be viewed as recognising a bad situation and taking positive and responsible steps to manage it.

To qualify for debt counselling, the consumer has to demonstrate a source of income – this is required to demonstrate that the consumer (And their spouse if married in community of property) have the means to repay back their debt. The most common way of demonstrating this is via a payslip, but there are other means (for example, if you have a rental income). It is best to check with the debt counsellor for your specific circumstances.

If unemployed and married in community of property, your spouse’s income – who will also be under debt review – will be considered.

During the first few months of debt counselling, creditors do not receive payments (and yes, they know about this and are okay with it) as fees are paid to debt counsellor for their restructuring work. This means your credit score will decrease slightly in the first few months of debt counselling. As you continue the process, your creditors will get paid and your credit score will start to improve.

The short answer is no.

Debt counsellors will advise you to destroy or return your credit cards while under review. As your debt counselling status will also be listed as such at all credit bureaus, you won’t be able to access any credit during that period.

The answer is yes. Debt counselling deals with your debt accumulated in South Africa, but you can live and work anywhere in the world while in debt counselling and still enjoy the benefits if you make your payments.

If moving offshore, you must advise your debt counsellor of your new contact details.

A Section 129 (referring to Section 129 of the National Credit Act) notice is a letter sent to you from a lender to highlight that you are in default, meaning you are behind in paying back a loan or credit agreement, and you need to take immediate action either by paying the default amount or going to a debt counsellor to bring the payments up to date.

Usually a Section 129 letter would give you 10 business days to take action, otherwise the lender has the right to refer you to court.

If you receive a Section 129 notice, please do not ignore it but seriously consider your next steps as it
is also a formal warning that if you don’t make the payments due, legal action will be taken against you. The Section 129 notice can be issued at any time after you have been in arrears for more than 20 business days.

The Section 129 notice includes the recommendation that you consider going into debt review. The notice will also specify the amount of time (usually 10 business days) granted to remedy the situation which gives you an opportunity to consider your options and if need be, approach a reputable debt counsellor for advice and assistance. If you opt to go under debt review, the debt counsellor will advise your creditors.