Debt review was introduced by the National Credit Act (NCA) in 2007. Since then, debt review has been an extremely effective way to get out of debt. Debt Rescue has saved thousands of South Africans from losing their assets, becoming blacklisted and allowing them to live without the heavy burden of debt taking away money from living expenses.
Although debt review is extremely effective, especially in the long run, it’s important for you to know what to expect during your journey to financial freedom. To help you make an informed decision about whether to apply for debt review, here’s a list of the advantages and disadvantages of debt review.
What are the advantages of debt review?
1. One fixed monthly payment
When you enter debt review, your debt will be restructured and consolidated into a single reduced repayment. This will ensure you can afford to pay for living expenses. This amount will then be paid to a regulated payment distribution agency, who are legally obligated to pay your creditors on your behalf.
2. Legal protection
Once you’re under debt review you will not have to worry about any legal letters or phone calls from creditors. You and your assets are legally protected by the NCA from creditors. This means that creditors may not hassle you. Your debt counsellor will take over all communication with creditors on your behalf.
While under debt review, the credit bureaus cannot blacklist you as you are protected by the NCA. Once you have completed the debt review process, the credit bureaus have no permanent record that you have ever been under debt review.
3. Get out of debt (for good) in an affordable manner
Once you’re under debt review, your credit profile will be flagged at the credit bureaus. This means you cannot take out any further credit until the debt review process is complete. This is a great way to stay clear of incurring more debt and start focusing on a debt-free future. You can exit the process once you have paid off all your debt or if you can prove your situation has changed and you are no longer over-indebted.
You will receive a clearance certificate and your credit score will reset to zero. The credit bureaus will be notified to remove the flagged listing. You will be able to start your credit profile again, on a clean slate.
How long you are under debt review depends on a number of factors, including:
- How much debt you have currently;
- How high your debt interest rates are; and
- How committed you are to becoming debt-free.
Depending on your circumstances it can take between 3 to 5 years to get rid of all your debt.
What are the disadvantages of debt review?
1. You may not qualify for debt review
Any South African credit user can apply for debt review, but you may not qualify for it. To qualify for the process, you will need to meet the requirements set up by the NCA.
You must be a South African citizen
Debt review was introduced by the NCA to help South African credit users get out of debt. Therefore, you must have a South African ID or passport to qualify.
You must be over-indebted
Debt Rescue can only help people who are over-indebted. If you are not over-indebted but you are struggling to make ends meet, read our money management blog to stay on top of your finances and to avoid falling into the debt trap.
You must be unable to meet all your financial obligations on time
If you are unable to make ends meet every month, debt review is the right option for you. Your debt counsellor will negotiate lower interest rates and extended payment terms with your creditors so that you can afford to pay back your debt and cover your everyday expenses.
You or your spouse must have a steady income
Unfortunately, if neither you nor your spouse is employed, you will not qualify for debt review. In order to qualify, you have to have a steady monthly income so that you can make a reasonable offer to your credit providers. If you are unemployed, there are other solutions available that may be beneficial for you.
If a debt counsellor determines that you are not over-indebted, you will not qualify for debt review. If this is the case, you will be issued with a letter of rejection explaining why you have been rejected.
Find out if you qualify for debt review.