You may be eligible for debt counselling, also known as debt review, if you pay your creditors on time each month. This is a legal process in which a debt counsellor creates a plan that allows you to pay off your debts while still having enough money to live on. It’s a great way to get out of debt, but there are a few things you should know about how it appears to work.
Who Qualifies for Debt:
Debt counselling is not available to everyone.
The debt counsellor will examine your income, expenses, and debt to determine if you are eligible for debt counselling. You must meet the following requirements:
- You must be deeply in debt. Not being able to afford your debt qualifies you for debt counselling, not simply having a lot of debt.
- Creditors cannot file a lawsuit against you. If they have, it is possible that it is too late to enter debt review. As a result, it is best to consult with a debt counsellor before creditors take action.
- You have a source of income. You make a monthly payment to your debt counsellor so that they can pay your creditors, which means you are highly unlikely to qualify for debt counsellor if you are economically inactive.
- You must be at least 18 years old.
- You must be employed, receive a pension, or have a consistent monthly income. Your income must be deposited into a bank account.
- If you are married in a community of property, your husband or wife must also agree to go through the debt review process.
- You cannot already be handed over to a lawyer.
- You cannot be imprisoned.
- You cannot be in debt management.
Your Monthly Debt Payment has been Lowered
A debt counsellor will create a budget, also known as a repayment schedule, in which money is allocated to your expenses and debts. They can start negotiating with your creditors to accept a lower monthly payment, ensuring that you can afford it and still have enough money to live on.
Your Creditors will not take Legal Action Against You
Your creditors cannot approach you for payment or take legal action against you while you are in debt counselling. When you have paid off your debts, you will be given a Clearance Certificate indicating that you are no longer in Debt Counselling
You Charge the Loan Consultant a Fee
Debt counsellors provide a useful service and are compensated for it. Fees include a filing fee (R57.50), which you may be required to pay in advance, as well as an ongoing administration fee. Typically, the administration fee is deducted from your monthly payment. For example, if you pay your debt counsellor R 2 000 per month, they may charge you R185 for their offerings and use the remaining R1 925 to pay your creditors. The National Credit Regulator regulates debt counsellor fees.
You are Unable to Accept any Additional Credit
When you enter loan counselling, you agree to pay off your debts according to your payment plan and not take on any additional amount for the duration of your debt review, which can be several years. Your credit report will show that you are under debt review, which means you will not be eligible for additional credit. Only after you have finished your debt review and have a Clearance Certificate can you apply for credit.
It Takes More Time to Pay off your Debt
Debt review relieves you of the burden because it usually results in lower monthly payments. While this is welcome news, it does mean that you will have to pay off your debts over a longer period of time. Debt counselling and debt settlement are not the same thing
Debt consolidation is simply combining all of your debts into a single loan that you pay off each month. Debt counselling is a continuous way of paying off your debts at a reduced monthly rate.
Dedication to debt counselling pays dividends.
Debt counsellor is an option to worry about making payments, skipping payments, and transferring money from one loan to another. Many consumers have benefited from debt review and emerged with a clean credit record. However, it takes dedication to pay your bills on time, live within your means, and stick to your budget.