Debt counselling for the average South African

We live in a country where, due to the high numbers of blacklisted individuals, debt counselling has become a lifesaving institution. Understanding what and how debt counselling can be beneficial to your financial status is very important. The National Credit Act (NCA) first introduced debt counselling in South Africa in 2007, and it has been incredibly beneficial to creditors, who have since received some of the funds that were owed to them as a result.

The term “debt counselling” carries quite a heavy negative connotation. A lot of people think that if someone seeks this service, their financial status is in chaos and this is the “only way out”. However, debt counselling is quite the opposite - you can take control of your financial standing with effective and affordable debt counselling. Contact Isibaya Deals and improve your credit rating today!

Understanding Debt Counselling

For years now, we've heard the term "debt counselling", but what is it? In the grand scheme of things, debt counselling is a service that caters to consumers, who find themselves in a debt-ridden situation and are struggling to pay off monthly expenses.

When you choose to start the process, you enlist the assistance of a third-party advisor, who enters into negotiations on your behalf with creditors, to whom you owe money. A more affordable monthly payment rate is then negotiated, which should give you a chance to breathe and learn to live within your means. As clear-cut as it may sound, there are elements of this process, which you should be fully informed off to recognise how it can benefit you. Read more about this below.

Do you actually need debt counselling?

There are two types of people in the world: people who are in denial about their finances and probably need counselling, and those who think they need this service, but don’t necessarily need it yet. Debt counselling is only given to consumers, who are heavily indebted as stated by the National Credit Act. This applies to individuals, who are classified as over-indebted, meaning they cannot meet their monthly financial obligations in a timely manner. People, who cannot pay the minimum monthly instalments and debit orders, fall into this category.

If you apply for debt counselling and it's discovered that you are not over-indebted, you are then sent a rejection letter detailing why you were classified unfit for counselling. However, if it is discovered that you are not over-indebted, but could potentially be at risk for becoming so, your debt counsellor may negotiate with your creditors in the hopes of rearranging your debt. Though they can't offer you debt counselling, you might feel that you need the counselling. You have the option of approaching the magistrate in your own capacity and apply for an order. This option is quite a costly one, which would mean adding to your current debt and shouldn't be seen as a viable option.

Debts that can be overlooked

If you choose to start debt counselling but are currently in legal proceedings with a creditor, whom you have evaded, please note that this debt can be excluded from your debt review. By law, a creditor needs to issue a section 129 notice, which informs the indebted consumer that he or she has the right to debt counselling, before pursuing legal action against a consumer. Quite a few people ignore this notice and don’t consider it very important. If you are currently in a legal battle with a creditor, the debt in question will most likely not be excluded from your debt review. It’s wise to start debt counselling sooner rather than later.

Debt counselling means you can acquire more credit

A few people still apply for more credit even though they are undergoing debt counselling. According to the National Credit Act, if you’re taking debt counselling, creditors are not allowed to give you additional credit. The only form of credit you can be given is a consolidation loan, which is meant to make sure that you don’t fall into deeper debt. You can only apply for credit once you have been granted a clearance certificate by your debt counsellor.

In Duplum – the biggest debt collection secret

In duplum is one of the biggest advantages of debt counselling. When faced with debt from a creditor, you have to pay off the initial debt including the growing interest rates that come with the debt. Unfortunately, this means that you won't be able to pay off the debt as quickly as you would want to. In common law, in duplum assigns a limit on the amount of interest a creditor can enforce on an account that is in arrears. This stops the consumer from falling into further debt, which should give you some time to settle your debt for good.

Are you in need of debt counselling?

Now that you have all the essential information regarding debt counselling, you can decide for yourself if you need to make use of this service or if one of your loved ones may need it. If you need debt counselling, Isibaya Deals is here to assist you further. We search the market for the most suitable counsellor that will work with you and help to get you the financial freedom you need.