What is the difference between debt review and debt consolidation
A consolidation loan is provided by a credit facility, which is classified as a loan. When applying for a consolidation loan, the institution will request proof of all of the debt. They then settle those accounts, which result in only one loan account, which is the consolidation loan. It is important to remember that with a consolidation loan, the interest rate can be anywhere between 18-27%. We have found that more people who have applied for consolidation loans find themselves in worse positions due to the higher instalment and interest rate on such consolidation loans. With debt counselling, the current debt remains outstanding, but the debt is consolidated into a reduced monthly payment plan. Not only are the instalments reduced, but you will benefit from the reduced interest rates on the accounts. Through debt counselling, we will be able to reduce the average interest across your unsecured accounts to approximately 10.25%, but we can go as low as 5% in some cases. This means that a person under debt counselling will be saving much more in the long run.
What is debt review
Debt review is a legal option for South African citizens that are over-indebted and find themselves not able to meet their monthly commitments. When you apply for debt review a debt counsellor approaches your creditors and makes payment arrangements on your behalf, with the core goal of their engagement with creditors to lower your monthly payments to a more accessible amount. You then pay one lower monthly payment to a payment distribution agency - which will redistribute your funds to all your creditors. Debt review was developed by the NCR and is part of the National Credit Act 34 of 2005 and the National Credit Amendment Act 19 of 2014. The National Credit Act offers debt relief to over-indebted consumers through the debt review process. The national credit act requires that a creditor perform a full credit assessment before entering into a credit agreement with you, these regulations contain credit assessment criteria that they need to comply with. This is to ensure you have the financial means to pay the proposed credit instalments. However - these regulations are sometimes loosely interpreted by creditors and they put you in a situation where you are over-indebted. Debt review is a solution to this exact situation.
When debt review is a good idea
Debt review is a good idea for the following individuals:
You still earn an income on a monthly basis
You pay more than a R1500 per month towards your debt
You are unable to meet your living expectations due to the impact debt payments are having on your financial situation
You don't have any judgements on your name
You are not blacklisted by any creditor
You want to save on debt payments on a monthly basis
When is debt review not a good idea
Debt review is not perfect for everyone - some individuals that are negatively impacted by applying for debt review are:
If you are blacklisted or there is a pending judgement against your name
You have lost your income and can't afford your debt anymore
You want to settle all your debt with an available lump sum of money
You can afford to make your debt payments monthly
You want to and think you will afford to buy a house or car in the near future
Advantages of debt review
Debt review is a handy financial tool, while you are under debt review the following benefits are clear:
Instant protection from debt collectors and legal action from your creditors
Creditors are not able to repossess assets as long as you keep paying your debt review instalment
Lower monthly payments
A single affordable monthly payment
Lower interest rates
In some cases, you may be able to settle your debt faster
You will be paying less on debt and therefore have more money available to spend on living expenses and supporting your family
Disadvantages of debt review
While under debt review - the following effects are to your detriment:
You are not able to apply for more debt while under debt review
In some cases, it can take longer to settle your debt
Your credit profile will be marked as under debt review while you are under debt review
You are bound to your debt review agreement and it can't be cancelled until you complete your entire debt review plan and settle all your debts
How do I apply for debt review
Applying for debt review is straight forward - reach out to a debt counsellor and start the process today. At Debt Solutions 4 U we believe in making things easier - from our website you have a few options available to you:
Apply for debt review online - we will review your application and let you know if you are eligible
Fill in a contact form and we will phone you soon thereafter
Calculate your savings - you can then send this through to you so we can start the application process
Once you have applied for debt review - you would need to sign the provided Form 16 to become protected under debt review, until then you will not benefit from the protection. If you work closely with your debt counsellor the process should only take a few hours.
