What is debt counselling and how does it work?

Debt counselling, also known as debt review, is a legal process in South Africa where a registered debt counsellor assesses your financial situation and proposes a restructured payment plan that is more affordable. This plan is agreed upon with your creditors and becomes legally binding.

Why do creditors agree to lower payments and interest rates?

Creditors agree because it guarantees regular payments, reduces legal risk, and often results in better long-term recovery of the debt amount compared to legal action.

Can debt counselling reduce my interest rates?

Yes. One of the major benefits of debt counselling is the ability to negotiate reduced interest rates with your creditors, making your debt more affordable.

What legal protection does debt counselling offer?

Once your debt counselling agreement is in place under the National Credit Act, creditors cannot take legal action against you as long as you adhere to the agreed terms.

How does debt counselling help protect my assets?

Debt counselling includes assets like your home or car in the restructured plan, helping prevent repossession by ensuring you make manageable monthly payments.

Will I still need to manage multiple debt payments?

No. Debt counselling simplifies your finances by consolidating all your debts into a single monthly payment, making it easier to manage.

What are the emotional benefits of debt counselling?

Debt counselling reduces financial stress and anxiety by providing a clear, legal path toward becoming debt-free with professional support.

When should I consider debt counselling?

If you're struggling with multiple debts or high interest rates, you should seek debt counselling as soon as possible to avoid further financial strain and legal consequences.

How Debt Counselling Helps You Negotiate Lower Payments and Interest Rates

Feeling overwhelmed by debt? You are NOT alone! Countless South Africans are turning to debt counselling as a lifeline to regain financial stability and end harrowing financial stress.

Debt counselling is a process that allows you to work with professionals to negotiate more manageable repayment terms with your creditors. This can include lower monthly payments and reduced interest rates, making it easier for you to pay off your debts and avoid further financial strain.

Understanding Debt Counselling

Debt counselling, also known as debt review, is a legal process in South Africa designed to assist over-indebted individuals. When you enter debt counselling, a registered debt counsellor assesses your financial situation and develops a restructured payment plan that is affordable for you. This plan is then proposed to your creditors, and once accepted, it becomes a legally binding agreement.

Why Creditors Agree To Lower Payments

You might wonder why creditors would agree to receive less money each month or reduce the interest on your debts. The answer lies in the benefits they receive from this arrangement.

Guaranteed Payments: Through debt counselling, creditors are assured of regular payments, even if they are lower than the original amounts. This is preferable to the risk of receiving no payments at all.
Legal Protection: Once a debt counselling agreement is in place, creditors are legally bound to the terms, reducing the likelihood of defaults and the need for costly legal proceedings.
Improved Recovery Rates: By agreeing to a structured repayment plan, creditors often recover more of the owed amount over time compared to pursuing legal action or debt collection.

The Role of Interest Rates

Interest rates play a significant role in the affordability of debt repayments. High interest rates can cause your debt to grow rapidly, making it difficult to ever reduce the overall amount of debt. Debt counselling allows for the negotiation of reduced interest rates, which can significantly lower the total amount you owe and make your monthly payments more manageable.

Legal Framework Supporting Debt Counselling

In South Africa, debt counselling is governed by the National Credit Act (NCA), which provides a legal framework for the process. The NCA ensures that consumers are protected and that the debt counselling process is fair and transparent. Under the NCA, once a debt counselling agreement is in place, creditors cannot take legal action against you, provided you adhere to the terms of the agreement.

Benefits of Debt Counselling

Asset Protection: Debt counselling can help protect your assets, such as your home or car, from repossession by including them in the restructured payment plan.
Single Monthly Payment: Instead of juggling multiple debts, you’ll make a single, consolidated payment each month, simplifying your financial management.
Reduced Stress: Knowing that you have a plan in place to manage your debts can alleviate the stress and anxiety associated with financial difficulties.

Taking The First Step

If you’re struggling with debt, it’s essential to seek help sooner rather than later. Debt counselling offers a structured and legal way to regain control of your finances and work towards a debt-free future. By negotiating lower payments and interest rates, you can make your debts more manageable and avoid the severe consequences of defaulting on your obligations.

Take control of your finances with expert debt counselling today.

FAQs & Answers

What is debt counselling and how does it work?
Debt counselling, also known as debt review, is a legal process in South Africa where a registered debt counsellor assesses your financial situation and proposes a restructured payment plan that is more affordable. This plan is agreed upon with your creditors and becomes legally binding.
Why do creditors agree to lower payments and interest rates?
Creditors agree because it guarantees regular payments, reduces legal risk, and often results in better long-term recovery of the debt amount compared to legal action.
Can debt counselling reduce my interest rates?
Yes. One of the major benefits of debt counselling is the ability to negotiate reduced interest rates with your creditors, making your debt more affordable.
What legal protection does debt counselling offer?
Once your debt counselling agreement is in place under the National Credit Act, creditors cannot take legal action against you as long as you adhere to the agreed terms.
How does debt counselling help protect my assets?
Debt counselling includes assets like your home or car in the restructured plan, helping prevent repossession by ensuring you make manageable monthly payments.
Will I still need to manage multiple debt payments?
No. Debt counselling simplifies your finances by consolidating all your debts into a single monthly payment, making it easier to manage.
What are the emotional benefits of debt counselling?
Debt counselling reduces financial stress and anxiety by providing a clear, legal path toward becoming debt-free with professional support.
When should I consider debt counselling?
If you’re struggling with multiple debts or high interest rates, you should seek debt counselling as soon as possible to avoid further financial strain and legal consequences.