Debt counselling is a financial solution where over-indebted consumers can have their debt restructured through a lower, affordable payment. This process also protects the consumer, since the debt counsellor negotiates with the credit providers on the behalf of the consumer.
Over-indebted consumers can apply for debt counselling to assist them in settling their debt. This is done by restructuring their monthly instalments and preventing them from taking on any further credit.
Businesses that offer debt counselling must abide by the National Credit Act (NCA) and they can be taken to the National Credit Regulator (NCR) if they don’t treat consumers in accordance with this.
In the NCA itself, it explains that its role is to assist over-indebted consumers to restructure their debt. The act provides for consumers who are unable to service their monthly repayments on their credit agreements, allowing debt counsellors to rearrange their monthly repayments with their credit providers.
Debt counselling can assist you in the following ways:
Once you’re officially under debt counselling, your creditors will no longer be allowed to contact you directly. Instead, they will work through your debt counsellor, who will champion your needs and negotiate the best deals for your unique circumstances.
Your creditors will no longer be able to take legal action against you. By going under debt counselling, you’re committing to paying off your debt and your creditors are required to be patient with this process.
Your credit score will be paused at the credit bureaus. You won’t be allowed to apply for further credit while under debt counselling and this status will be displayed on your credit record until the process is complete. Despite hearsay, there is no ‘black mark’ next to your name once you have paid up your debt and received your clearance certificate.
Debt counselling usually takes between three and five years to complete – but this depends on the amount of debt you have and how much you’re able to pay towards your debt each month. Upon completion, you’ll receive a clearance certificate and your name will be cleared at the credit bureaus.
