Everything you need to know about debt review in South Africa
What is debt review and what is the significance of undergoing this?
Due to the recent economic instability and widespread job loss caused by the Covid-19 outbreak, debt accumulation is widespread.
You have no choice but to comply when lawyers or collectors start demanding payment for your late credit agreements. If your debt-to-income ratio is very high, this may seem like a difficult task.
Undergoing debt review can help you complete your financial obligations and free up more money for living expenses in the process.
This article will teach you all you need to know about debt review and why it can be the best option for you if you are overly indebted.
Why is debt review important?
1. Creditors won’t be able to take legal action during debt review
By undergoing a debt review process, you are protecting yourself against legal action by your creditors.
After you have paid off your debt obligations, the debt review company will provide a clearance certificate verifying your debt-free status. You can use this release certificate to apply for future loans with ease.
2. Your monthly payments will be restructured, and reduced
When you enrol in a debt review programme, your manageable monthly payment is determined. If people continue to rack up debt, they may never be able to save enough money to provide for their basic needs.
As part of debt counselling, you and your counsellor will assess your financial situation by comparing your debts, expenses, and income.
With these numbers in hand, your counsellor can calculate a repayment percentage that allows you to keep up with your debts while also meeting your other financial obligations.
3. You won’t be able to incur more debt during the process
Applying for debt review will prevent you from accumulating any further debt. The programme sets you up on a monthly payment schedule that you must keep to.
The company will provide you with a clearance certificate once you have paid off all of your debt, after which you can then apply for loans from your creditors.
4. Debt review won’t hurt your credit record
By signing up for a debt review programme, you can avoid having your mounting debts appear permanently on your credit report.
In addition, a debt review programme can assist you in erasing your credit history with a credit bureau clearance, making you once again qualified to apply for loans. This is in stark contrast to the impossibility of clearing your name from a blacklist.
5. Debt review provides you with reduced interest rates
Another perk of debt counselling is lower interest rates on your loans. If you don’t make your payments on time, interest will accumulate, making it more expensive to pay off your debt.
Creditor interest rates might be lowered through negotiations between you and your debt counsellor. The end result guarantees that a greater portion of your payment goes towards reducing the principal balance rather than the interest.
6. Debt review makes debt repayment easier
It’s easy to become confused about which bills belong to which creditors when you have multiple accounts to repay. The services of a debt counsellor allow you to consolidate your debts into a single monthly payment.
From the above, it’s clear to see that debt review should be highly considered by those in debt.
