Drowning in debt? You’re not alone. Many of South Africans are battling to meet their financial commitments.

If your monthly repayments on your house, car, credit cards and other accounts have risen so high you’re facing blacklisting, one option is to go into debt counselling or debt review.

The debt review process was introduced in 2007 with the National Credit Act (NCA). The benefit is that, while you’re getting debt counselling and in the process of paying off your debts, legal action can’t be taken against you.

Bear in mind that you can only take advantage of this process if you have a regular income to develop a reasonable repayment plan.

And remember that there is a rejection fee of R300 plus VAT if the debt counsellor decides that you can manage your debt, so you really must be battling.

How it works

1. Find a debt counsellor. Our suggestion is that you do a search for members at www.ncr.org.za, the website of the National Credit Regulator.

2. Give your payslip, your ID document and all your monthly repayments to the debt counsellor. You’ll also need to provide a monthly budget of other expense, such as food and petrol.

3. The debt counsellor will work out if you are over-indebted (if your payments are simply unaffordable on your current income).

4. The debt counsellor will crunch the numbers with you and work out how much you need to live on and what is available to repay debts.

At this point, you’ll be able to officially apply for debt counselling, and the counsellor will tell you what the costs are:

  • an application fee;
  • a rejection fee (to weed out frivolous applications);
  • a restructuring fee;
  • a small monthly fee;
  • a legal fee that is needed for the consent order in the second month; and
  • a fee if you withdraw from the process later on.

All of this MUST be explained to you thoroughly, and you MUST ask questions if you have any.

5. The debt counsellor will then contact all your credit providers and check that you’ve got all the amounts right. He or she will also get hold of the credit bureaus and tell them to list you as being under debt counselling.

This is NOT like a blacklisting – it’s a protection. It will be removed completely once you’ve paid everything off.

If all the credit providers agree with the repayment proposals offered by the debt counsellor, a legal ‘consent order’ will be obtained. (In many cases this could mean a reduction in fees and interest payable by the consumer.)

This means that the terms have been agreed to and can’t be changed independently by any of the credit providers.

Should one or more of the credit providers not like the terms, the debt counsellor will have to approach a magistrate with the proposed debt repayments to get a decision. As long as the repayment plan is reasonable, it should be approved by the court.

6. Once an agreement has been reached, the debt counsellor will give you your final repayment plan and also submit it to a Payment Distribution Agency.

This agency will take a lump sum from you each month and split it up between the credit providers, according to the repayment plan.

Your obligation is to keep up the monthly payments until such time as the whole amount has been paid off.

Source: Fin 24

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Representative Example
Loan Repayments are full of variables and things such as rates and once-off initiation fees. These vary depending on your individual credit profile. The terms of the repayment period can range anywhere from three months to a maximum of 6 years, with varying Interest rates from creditor to creditor up to a maximum of 28% per annum (compounded monthly).

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