With so many bills to cover and the cost of living rising year after year, it can be easy for your debts to spiral out of control. If you’re struggling with debt and can’t see a way out, debt counselling could be what you need to turn your finances around. Debt counselling can offer professional advice, negotiations with your creditors and the restructuring of your payment plans. Speak with a debt counselling advisor through Money Expert and get your finances back on track today.
Frequently Asked Questions
What is debt counselling?
It’s not uncommon for people to find themselves with mounting debts, and urgent bills to pay.
If possible, you could make a firm budget to manage your finances and then over time the money coming into your household will be enough to get you back ‘in the black’.
However, what happens if your debts get too big or you have too many to manage, and your income is not going to be enough?
When owing money gets beyond you, your monthly repayments on loans can take up all or most of your income. This leaves you with too little to spend on essential living expenses like food.
In that case, you may need to apply for debt counselling, particularly as it’s a robust way of making your monthly outgoings more manageable.
Who can apply for debt counselling?
South African residents can potentially benefit from this financial lifeline thanks to a piece of legislation called the National Credit Act of 2005 (NCA for short).
The NCA created the concept of ‘Debt Counselling’ to help people who could not find any other way of coping with substantial money problems. This is called ‘over-indebtedness’ and means a situation in which your debts have become too large – or too many – to tackle without help.
If this is you, read on for what’s involved and how to apply for debt counselling.
What does debt counselling involve?
The first step is to acknowledge that you are ‘overindebted’ and that you need this assistance.
You apply for the help, and if you are eligible, a debt counsellor is appointed to help you do a full Debt Review. Your debt counsellor will also handle all discussions with your creditors, who can no longer contact you directly.
Once a practical repayment plan for your debts has been created, your debt counsellor gets a court order to make it all official.
While this is happening, you are protected from legal action by any of the organisations you owe money to (called your creditors). This is for a period of 60 days from your application date. This is your ‘breathing space’ to find a workable resolution, but you must be prepared to follow through on any arrangements that are made.
What are the benefits of debt counselling?
Having the advice and help of a debt counsellor is an excellent way to manage the situation when you're overburdened by debt. Remember, they also handle discussions with creditors, so they bring their professional insights into the mix.
Your debt counsellor will work with you, and your creditors, to find a way to set up a repayment system that is equitable (balanced) with a realistic amount you can afford to pay each month.
One of the advantages is that you will have enough money each month for normal living expenses such as food and rent, which can be a big relief.
What are the steps to apply for debt counselling?
There are various organisations in South Africa who offer debt counselling services under the terms of the NCA. It is vital that you only apply to one officially registered to provide this help.
If you want to check this out, you can call the National Credit Regulator call centre on 0860 627 627 and ask for an organisation’s registration NCRDC number. This proves they are authorised to be debt counsellors.
When you apply to a provider they will assess whether you meet the criteria under the legislation. Then, that organisation will act as your intermediary and give you advice as a debt counsellor.
You will also pay a financial instalment to an organisation called a Payment Distribution Agent (PDA), which shares out the money to your creditors. The PDA keeps all the records on who owes what, to whom, and what form the payment schedules will take.
How does it affect future lending?
It is important to note that if you take this route, you will be officially listed with the Credit Bureau as someone who is using debt counselling. This puts limits on any future lending activities.
You will not be able to take out new loans, or create new debts, until you have a Clearance Certificate. This shows that you have met all the conditions and obligations placed on you by the Court or Tribunal order; and that you have satisfied all the conditions outlined in the National Credit Act.
Many people using debt counselling find themselves debt-free, with a ‘clean slate’ on their credit rating, after around 60 months.
How much does debt counselling cost?
This is not free help to manage your debts. However, the National Credit Regulator has set a level for fees for this service and issued registered providers with guidelines on what they can charge for.
The cost of this help needs to be weighed against the likely financial problems if your over-indebtedness goes on for too long.