Are you aware of the various options you have when it comes to getting out of debt? There are four debt management options which you can consider when you’re over-indebted or struggling with your finances. These include administration, consolidation loan, debt review and sequestration. But how do these options weigh against each other? Plus we’ll explain why debt review is considered the best.
Administration
The first option is administration; which only looks at unsecured debt. This means your home loan and vehicle finance are not included for protection. Another disadvantage of administration is the R50 000 limit of the debt amount. Administrators only pay funds over to credit providers every third month. The fees and commissions are high and most people entering the administration process will be worse off.
Consolidation loans
Another option is getting a consolidation loan. Consolidation loans often seem to be the best option, but people borrow money to pay off debt. Thus creating more debt. With consolidation, you only shift your debt from one place to another. Plus, most people will not qualify for a consolidation loan.
There are two ways in which you can consolidate your debt. Firstly, if you own property and have liquidity in the property (your property is worth more than what you still owe the bank). You can use that to finance your other debt. Secondly, if you take out a consolidation loan at the bank. This usually has a limit of R50 000 and you must be able to afford the instalment on top of your existing debt instalments. For most people, R50 000 is not enough anyway, plus the interest and fee charges are high.
Debt review
Debt review is a process aimed at people who are over-indebted and unable to cope with monthly financial obligations. When you enter the debt review process you are protected against legal actions from creditors. Taking all legal issues and negotiations off your shoulders.
DebtSafe emphasises the fact that there’s no shame in asking for help. Debt review has helped thousands of South Africans. It’s a great way to get out of debt step by step and to actually see the light at the end of the tunnel.
Sequestration
It might sound like the ideal solution to get out of debt but the person who is sequestrated loses almost all of their assets. This is because your assets are sold to cover the total of the debt. Additionally, you are not allowed to get credit for five years after being sequestrated. The sequestration court order stays on record for 30 years on the court.
Why debt review is your best option
Debt review offers exactly what a person needs to take control of their debt. Besides offering immediate financial relief, it combines all monthly instalments into one single reduced instalment.
When you enter the debt review process, credit providers can’t take legal action against you on arrear accounts. This extends to secured debts such as home loans and vehicle finance. Assets are also protected from being repossessed and sold at auction.
The DebtSafe debt review process is 100% transparent and you will have a relationship manager dedicated to you, taking care of your documentation and legal issues.
After the successful completion of the debt review process, you’ll receive a clearance certificate. This certificate is sent to the credit bureaus to remove all information about your accounts that were subject to the debt review process. This means that you will truly get to enjoy a new financial future, free form the worries of debt.