What is debt counselling?
Debt counselling is a debt management system introduced by the National Credit Act (NCA) in 2007. It was designed to provide over-indebted consumers with an alternative to traditional remedies for defaulting on their debt administration and sequestration.
Rehabilitation is the main point of debt counselling while it’s also designed to protect you from creditors and loss of assets. The process is highly regulated and is simple, convenient, legal, voluntary and successful.
Anyone can apply, but not everyone will qualify. It’s always better to apply as early as possible to find out whether all your debts can be included or not.
How does it work?
A debt counselling company will negotiate with your creditors on your behalf. They will try to get you a lower monthly instalment and interest rate. Once reduced, you’ll get an affordable monthly instalment. This will reduce the minimum amount payable by extending your repayment term, which will ensure that your creditors will stop harassing you.
The debt counselling process is not free. Fees are regulated by the NCR and the process is completely transparent. Rejection fees may also apply, while a counsellor’s fee of no more than R6000 will also be charged, along with after-care fees.
What are the benefits?
- It’s the quickest way to a clean credit record. As soon as the credit bureau has received your debt clearance certificate, your negative listings will be removed.
- You won’t have to worry about creditors harassing you.
- You get to pay one monthly instalment, instead of having to keep up with multiple repayments.
- You’ll have financial freedom once your debts are paid off.
- You’ll be protected from the potential loss of assets.
- You’ll be provided with tools for how to manage your debt better.
- The majority of consumers are able to get their profiles rehabilitated within 60 months and become debt free.