What is debt management?

This is a formal agreement between a debtor and a creditor that addresses the terms of an outstanding debt. it commonly refers to a personal finance process of individuals addressing high consumer debt.  

The process helps to reduce debt.

Debt management is targeted at South Africans who are struggling to make debt repayments, but are not yet classified as over-indebted. With over 10 million South Africans struggling to repay their debts, an increasing number of people are turning to debt management as one of their last resorts.

The process can help clients to solve their debt problems and empower them to take back control over their financial situation by negotiating with creditors and initiating a payment plan.

It supplies clients with structured and helpful debt management tools needed to gain financial independence and helps to increase cash flow by managing debt.

What to keep in mind in terms of debt management:

Changes in the repo rate may affect your debt management plan. Interest rates that you are charged may be linked to prime.

The process is usually taken care of by a debt counsellor who will collect payments from you and pay the various creditors on your behalf. This requires a thorough examination of your financial standing as well as your affordability, in order to create a suitable debt management plan for your needs.

Setting a debt management plan in place is seen as a new contract to settle your outstanding debts in full, so you need to be able to have some form of income to be able to settle all your debts.

Debt management may give you an opportunity to make one monthly payment that will settle all your outstanding debt. This way you are able to keep track of your finances and won’t have to keep track of multiple debts.