Common myths about debt review.
5 myths about debt review.
Many South Africans have misconceptions about debt counselling. People tend to think the process will send them in the opposite direction of financial recovery. In reality, we've seen countless successes during our time as a credit counsellor.
When people believe that they're drowning in debt, getting in touch with the right debt counsellor can go a long way towards making positive changes and shaping your financial future.
Five main reasons for debt.
1. Debt review is a last resort.
Debt review is a debt rehabilitation programme that helps people with over-indebtedness. Debt review was developed as a way to help those who have become burdened with their debts, and manage it more effectively. In 2005, the National Credit Act was implemented to provide debt relief and to encourage borrowers to pay back what they owe in a manageable fashion. Debtors will ultimately be in a better situation by utilising the debt review procedure when compared to entering into a debt settlement process without any formal guidance.
2. You will be blacklisted if you’re under review.
Debt review is an opportunity for over-indebted consumers to wipe the slate clean and become debt free. It’s a provision created by the National Credit Act to help those who have experienced trouble getting their finances under control. In fact, the term “blacklisting” no longer exists. The name used commonly in South Africa relates to a blacklisted credit record meaning that one has defaulted or is delinquent.
Once your account is under debt review, you will be unable to apply for credit. Learning how to live without any new forms of debt and acquiring your clearance certificate at the end can help you get back on your feet. This may seem daunting, but after battling from being over-indebted, it's important that we not only learn from our mistakes, but carry the lessons forward, long after we're done paying off our debts.
3. Debt review does not work.
Debt management has been a successful and affordable solution for thousands of South Africans caught up in over-indebtedness. The process ensures that all living expenses are covered, and that the consumer can live without going into any further debt. It’s a good option for consumers with a stable income who want to limit their financial stress.
4. Debt review takes 5 years or more.
One of the biggest myths about debt review is that it takes a certain number of years. Even though it can take up to 5 years it depends on how willing you are to make your new budget work for you.
5. Debt counsellors don’t pay creditors.
Debt counsellors don’t have access to clients' funds. All payments are made through a payment distributor as per the National Credit Regulators’ terms and conditions. The National Credit Regulator manages the client’s payments on their behalf and distributes funds to all creditors as allocated by the court agreement.
A debt review is the last step in the debt management process. It is where the debts are consolidated into one manageable monthly payment. Most people believe they can reduce debt by negotiating with their creditors. This isn't always the case. Debt review is one of the best ways to reduce your debt and work towards living debt-free.