Understanding debt review in South Africa

The process of debt evaluation has the potential to drastically improve your life. Debt consolidation loans might help you get your finances in order and set up a payment plan that you can actually stick to.

In order for you to know what to do and what not to do during debt review, here is a useful guide to debt review in order to streamline the process.

A closer look at debt review

Debt review is an official debt rehabilitation program with the goal of assisting those who are legitimately having trouble making ends meet while still making payments on their debts.

Your debt counsellor will contact your credit card companies directly to discuss lowering your interest rates and improving your repayment arrangements.

Following the completion and acceptance of your payment plan, you will be able to begin making regular payments towards the settlement of your debt.

The repayment process during debt review

Once your repayment plan has been arranged and completed, you will not be able to skip any instalments.

Avoid jeopardizing your debt review agreement by making even the smallest of monthly payments as outlined in your repayment plan.

Your credit status during debt review

When filing for debt review, your goal should be to pay off as much of your outstanding debt as possible. As a result, you shouldn’t take on any new debt until you’ve settled your current obligations.

You will not be eligible to submit an application for banking products and services that would otherwise allow you to borrow funds from the bank or other approved credit providers.

You won’t be able to apply for any new credit cards while under debt review, and continuing to use your existing cards while making payments will increase the likelihood that your review will be cancelled.

While under debt review, you also cannot seek for a legitimate loan from a bank or other legitimate credit providers. Debt review is structured in this way to ensure that you fulfil your debt obligations as quickly and as affordably as possible. Once your debt obligations have been fulfilled, you will once again be able to apply for credit.

Paying creditors during debt review

If you are experiencing a temporary cash flow problem and can negotiate a written agreement with your credit providers to begin paying off your debts, you can engage with them directly.

If you owe money to more than one creditor, though, it’s a good idea to get some help arranging a repayment plan through debt counselling before you begin your debt assessment.

Debt review can assist you avoid legal trouble by providing a 60-days period during which creditors cannot take legal action against you and in which they are prohibited from threatening legal action provided you stick to your repayment plan.

Your credit record after debt review

Debt review does not negatively affect your credit score like being blacklisted does. Once you’ve finished paying off your debt, the repayment plan will be deleted from your credit report and won’t have any bearing on your ability to get a loan in the future.

Also read: Debt: avoid the following pitfalls