10 Burning Questions About Being Under Debt Review
Many South Africans are in spiralling debt and feel overwhelmed by the situation, unaware of their financial future. You might be among the many struggling to keep your head above water and thus heard that debt review might be the answer.
Read: 3 Common Misconceptions about Debt Review
But what exactly does it involve? To help you understand the process and make an informed decision, below are answers to ten of the most frequently asked questions when one is under debt review.
1. What is it to Be Under Debt Review?
Debt review is the process of helping an overly indebted person regain control of their finances. In South Africa, it is a legal procedure whereby a debt counsellor should carefully analyse your financial state, negotiate with your creditors to reduce payments, and then create a manageable repayment plan. The process aims to prevent things from deteriorating further while one pays off the debt little by little.
2. How Does the Debt Review Process Work?
Firstly, a consumer will consult a debt counsellor who will look into his or her financial status. If your status is over-indebted, the counsellor will inform your creditors (on your behalf) and apply for debt review. Upon acceptance, the debt counsellor will negotiate with the creditors to reduce your monthly payments and interest rates and then draft a repayment plan that is within your affordability. The debt counsellor will then send the plan to the court for validation, binding all parties concerned to the agreement.
3. Can I Get Loans While Under Debt Review?
One of the questions one would normally ask is if one can obtain loans while under debt review. So, the answer is no; you cannot obtain loans or take up further credit while under debt review.
Read: Are Loans for Debt Review Clients Legal?
This restriction is put in place to prevent you from going further into debt and to ensure you focus on paying back the current obligations. As noted, although one cannot get new loans, reduced payments made possible through debt review make it easier to manage your money and will free up some disposable income.
4. How Long Does Debt Review Last?
The process typically ranges between three and five years but may be shorter or longer in various ways. How long you will be under debt review depends solely on how big your debt is and the kind of repayment plan agreed upon with your creditors. Once all your debts have been paid in full, you will be given a clearance certificate, freeing you from debt review.
5. What Are the Costs Involved?
Naturally, there are some costs involved in entering the debt review process. An upfront application fee, a monthly administration fee, and debt counsellor fees are typically charged for handling your case. To simplify the process, they include such fees in your repayment plan. The good thing is that you are not expected to pay any costs in advance. Moreover, the NCR, a regulatory body that oversees the credit industry and protects consumers, regulates these fees to be reasonable and open to protect all parties.
6. Will My Credit Score Be Affected?
Your credit score will be affected while you’re under debt review. At this time, the debt consolidator will flag your credit profile to indicate that you are undergoing debt review. This flagging, however, will no longer be visible once you have completed the process and obtained your clearance certificate.
Read: A Complete Guide to Understanding Your Credit Score in South Africa
Although your credit score may initially suffer a setback due to being under debt review, the process involved ultimately helps improve your score by ensuring that all your debts are paid off responsibly.
7. Can I Exit Debt Review Early?
It is possible to exit debt review early, but only under certain conditions. You must have paid off all your debts, except for home loans, to be considered for early exit. Alternatively, if your financial situation improves significantly, you can apply to the court to have the debt review process terminated. However, exiting early without clearing your debts could leave you vulnerable to legal action from creditors.
8. What Happens If I Miss a Payment?
Missing a payment while under debt review can have serious consequences. It could legally lead to the cancellation of your debt review agreement, meaning your creditors can pursue legal action against you. Sticking to your repayment plan and communicating with your debt counsellor if you face payment difficulties to avoid legal repercussions is crucial.
9. Will My Assets Be Protected?
Yes, debt review significantly benefits you by providing legal protection for your assets. Once you’re under debt review, creditors cannot repossess your belongings or take legal action against you without going through the court first. This protection ensures that you can keep your assets safe while repaying your debts according to the agreed plan, giving you a sense of security and reassurance.
10. Is Debt Review The Right Option for Me?
Debt review is not a one-size-fits-all solution. It’s most beneficial for over-indebted individuals who struggle to make monthly payments. If you’re facing financial difficulties but can still manage your debt, other options like debt consolidation or negotiating directly with creditors might be more suitable.
Read: When is the Right Time To Enter Debt Review?
Consulting with a debt counsellor is crucial in determining the best option for your financial situation. Their guidance and support can make the process less daunting and more manageable.
Take Control of Your Financial Future
Debt Review is an effective tool that assists over-indebted people and those seeking ways to get out. It assures indebted South Africans of legal protection, reduced monthly payments, and the comfort of knowing their debts will be paid in time so they can regain control of their financial future. If you are considering entering the debt review process, research the process, benefits, and limitations, and talk to a trusted debt counsellor.
About Debtline
Debtline is an NCR-registered, reputable debt counselling firm that specialises in empowering clients to overcome the complexities of debt. Their counsellors will guide you with caring professionalism throughout the debt review process.
If you cannot make ends meet or want to know more about managing your debt, let Debtline be your step into financial freedom. Call today or complete our online form for a free callback. Let us show you how we can help you regain control of your financial future.
