In today’s challenging economic climate consumers are eagerly searching for financial solutions to the ever-increasing cost of living, high interest rates on debt and unforeseen expenses that seem never-ending. Consumers who have significantly high debt compared to their income, are inundated with possible debt solutions from various companies which can be very confusing and leave them even more despondent…
Debt Review can be a viable solution to over-indebted consumers who simply cannot afford to pay their monthly debt instalments and their normal living expenses anymore. This can be because of a change in income, a personal situation, reckless lending or simply the rise in interest rates that has made debt repayments unaffordable.
Why Consumers Are Confused…
These are the type of questions that consumers have when they hear debt review…but let’s clarify what it is to allow over-indebted consumers to rethink Debt Review and consider it as a feasible option to improve their financial position over time. At the end of the day, it is a choice that a consumer can make that could offer immediate solutions to their current debt concerns. Solutions that, in all probability, will offer long-term relief and benefits to their financial wellness journey.
What is Debt Review?
A regulated and lawful process that puts an over-indebted consumer in a position to sustainably, and attainably, pay back their existing debt, still have sufficient cashflow to pay essential expenses on their new monthly budget and protect their assets from creditors during the Debt Review process.
The Debt Review process must be implemented by a registered Debt Counsellor and approved by the courts. Creditors must also agree to the proposed repayment plan prior to implementation, meaning all parties are aware of the situation, timelines, instalments and legal requirements.
Once an over-indebted consumer can no longer afford their monthly debt repayments they can apply for Debt Review. A free assessment, and proposal, is done by a registered Debt Counsellor to illustrate what the consumers possible new budget and repayments could look like in the Debt Review process.
Should a consumer agree, the Debt Counsellor negotiates with the relevant creditors for reduced repayment amounts, payment durations and in some cases even reduced interest rates. Once approved, the application is then submitted in the courts to be approved and implemented. This entire process can take 2 to 3 months from application but, importantly for the consumer, the financial relief is immediate.
All creditors will be informed that the consumer has commenced with the Debt Review process, assets will be protected, and the consumer will benefit from the lowered monthly instalments from month 1. The consumer is legally under Debt Review from the date of application, and all relevant documentation has been signed and submitted, as the Debt Review process has officially commenced.
The agreed total repayment of all included debt accounts is referred to as the rehabilitation amount. This amount is paid into a 3rd party bank account of a Payment Distribution Agency (PDA), normally via debit order. The reduced monthly repayment is not paid to the Debt Councillor and not directly to the creditors either. The agreed instalments are then distributed to the various credit accounts as per the approved budget until the debts have been settled.
Budgets & Terms
During the application process a proposed budget will be calculated by the Debt Counsellor which not only incudes the consumers new, proposed debt repayments, but also certain critical expenses such as medical aid, travel costs, insurance, school fees and other essential living expenses. This budget is based on a consumer’s affordability, considering their current income versus their living expenses and proposed debt repayments.
The proposed repayment proposal will always include an overall duration, or rehabilitation term. This varies from case to case, depending on how much debt is included in the Debt Review process. The overall term usually varies between 2 and 5 years. One of the most important aspects of Debt Review is that during this term the consumer cannot take out any new debt. The process is a way of reducing debt, increasing cashflow for living expenses and encouraging discipline and consistency from the consumer to repair their financial situation over time.
It’s not a consolidation loan, there is no new debt. A Debt Review consumer is also not blacklisted, merely noted as ‘under Debt Review’ by the credit bureaus which prohibits any new debt to be taken out and protects the consumer against legal action by creditors. An employer doesn’t form part of the process and will not be informed that an employee is under debt review. The process is completely discreet.
What Happens After Debt Review?
Once a consumer has paid all the premiums over the agreed terms, they are issued with a clearance certificate and the credit buraus are informed that they are no longer under Debt Review. They are now free to apply for new credit, hopefully in a disciplined and sustainable manner, for required expenses and asset finance which they can afford. In some instances, consumers can exit the Debt Review process earlier than the agreed term should they be able to pay off debt with alternative funds (bonuses/commission/inheritance/etc.) or if they only have secured debt remaining within the Debt Review rehabilitation amount, such as vehicle finance or a home loan. DebtSafe can assist with this process too. The Debt Review process is designed to not only assist in becoming debt free but also to educate and encourage consumers to make more reasonable and informed decisions when it comes to future debt.
Closing
Debt Review doesn’t have to be as complicated as consumers fear. It’s a viable choice for over-indebted consumers who are willing to take control of their finances, practice discipline in repayments and commit to a fixed term, after which they will enjoy debt-free satisfaction and relief. Immediate solutions for long-term relief.
DebtSafe has over 15 years of experience and we have helped thousands of South Africans on a New Beginning in their financial journey. Accredited, trusted and honest.
Debt Review.
Financial Tomorrow.
DebtSafe.
Contact us today and restart your financial journey, your NEW BEGINNING.
*This blog content does not constitute financial advice and is merely an overview of the Debt Review process for informational purposes.
*DebtSafe is a registered Debt Counsellor, National Credit Regulator Nr: NCRDC1078