Debt Review: The Answer to Your Financial Worries During Lockdown

Lockdown. That dreaded word that has caused most of us to struggle financially. Between salary cuts and job losses, many of us are feeling the pressure.

Although the government has stepped in to help some South Africans cope financially. These funds are not a sustainable solution. Find out more about the relief fund here. You will have to take control of your own financial situation. Use the lockdown as an opportunity to plan ahead and secure a stronger financial position for the future.

Losing your job during this time or taking a salary cut could impact your ability to pay creditors on time. It is in your best interest to take care of your debt before it’s too late.

Debt review may be the perfect solution to your debt problems.

And here’s why.

The debt review process could be your saving grace if you’re struggling to make all your payments on time.

Once you’re under debt review:

  • All your debt will be consolidated
  • You’ll only make one single reduced monthly instalment
  • All your assets will be protected
  • Creditors aren’t allowed to harass you

What is debt review?

Debt Review, or debt counselling, helps over-indebted South African’s get out of debt. This process was introduced by the National Credit Act (NCA) in 2007 to help prevent consumers from being blacklisted.

If you are still earning an income, even though it may be reduced, but struggling…

If you’re employed and struggling to make ends meet, debt review could be the ideal solution for you. Especially if you’ve experienced a salary cut and falling deeper into debt.

You may have thought about a consolidation loan, but that’s a short-term solution or may even get you into further debt.

For more information about debt consolidation read our article Exposed: Consolidation Loans Are A Rip-Off.

Are you over-indebted?

There are a few things that will indicate whether you’re over-indebted or not. If you can’t afford to pay all your monthly living expenses plus all your debt repayments, you may be over-indebted.

You will have to act and sort out your financial situation before it’s too late.

How do you know if you’re over-indebted?

1. You are living off your credit card every month

Credit cards have high-interest rates and they’re extremely easy to use, making them a perfect recipe to fuel your debt.

When times are tough it’s easy to rely on your credit cards.

In difficult financial times like these, using relying on a credit card too much may result in over-indebtedness.

2. Good debt vs bad debt

If you don’t understand the difference between “good debt” and “bad debt” you’ll never learn to manage your money successfully.

What is the difference?

The short answer.

“Good debt” is debt that helps you make more money. Like buying property, a car or an education, for example. You can use ‘good debt’ to your advantage. It could also help you grow your financial situation.

“Bad debt” is generally used to sustain a certain lifestyle. This may include credit card debt or personal loans.

Not all credit card debt or personal loans are considered “bad debt”, however, if you rely on this type of debt, it’s considered “bad debt”.

Generally, this type of debt leads to bad spending behaviour.

Which means you’re living beyond your means and you actually can’t afford your current lifestyle.

For a more in-depth explanation have a look at our post The Good Debt Vs Bad Debt Secret.

3. Spending your entire paycheque

It may be a sign that you’re over-indebted if you’re spending your entire paycheque as soon as you get it. You’ve got too many expenses and you need to cut back somewhere.   

If you’re spending most of your income on debit orders and debt repayments you won’t have money left over for living expenses or savings.

Sooner or later this behaviour will lead to more debt and set you back even further.

4. Don’t have an emergency fund

A lot of people are suffering financially during lockdown because they never built up an emergency fund.

Having an emergency fund will help you get in tough times, like lockdown. If you’ve been laid off or if you’ve experienced a salary cut, your emergency fund would help you financially.

The golden rule of an emergency fund is to have 3x your living expenses saved up. If you can save up more than that, then save up 6x your living expenses.

This fund will help make those big payments when things get tough.   

Having this financial security behind you will reduce a lot of stress that comes to job loss or salary cuts.

5. Creditors harassing you

It’s inevitable that creditors will eventually start harassing you if you don’t pay up.

Creditors can contact you at any time in an attempt to collect their money. If you can’t afford to pay them, they’re allowed to take legal action against you.

At that point, you may be out of options.

Once creditors start taking legal action there’s little you can do to turn the situation around.

If you are in this position, rather act now before it’s too late.

Advantages of debt review

Only make one single reduced monthly repayment

Once you’re under debt review you’ll only have to make one single monthly reduced debt repayment.

You’ll only be responsible for making a single monthly payment to your debt counsellor, Debt Rescue, and who will then take care of your debt, on your behalf.  

We will ensure that all your debt repayments are made on time, every time.

Lower monthly repayments

As part of the debt review process, we’ll be in touch with all your creditors to renegotiate lower monthly repayment amounts.

This ensures that you can afford all your monthly debt repayments and your monthly living expenses.

Your assets will be protected

Creditors are legally allowed to harass you if you fall behind with payments. And even worse than that, they can take away your assets as a form of payments.

Once you’re under debt review you are legally protected against your creditors.

Creditors are not allowed to repossess your assets or even be in contact with you, once you’re under debt review.

Debt Rescue, or your debt counsellor, will communicate with creditors on your behalf.

So you don’t have to worry about that anymore.

No more credit

Once you’re under debt review you won’t be allowed to make more debt. The process prevents you from making more debt while you’re actively trying to get rid of your debt.

Once you’ve completed the debt review process and you’re debt-free, you’ll have a clean credit score and be allowed to apply for loans.

Disadvantages of debt review

You will need to qualify

You will have to qualify for debt review. Your debt counsellor, Debt Rescue, will have to assess your current financial situation.

To qualify you will need to be employed and have a sufficient amount of debt.

You can use our debt calculator to see if you qualify.

Some debt counsellors may not be legit

A debt counsellor has to be registered with the National Credit Regulators (NCR) before it is allowed to act legitimately.

You can ask a debt counsellor for their registration number or you could look it up at NCR website.

Debt review does not cover all debt

Once a credit provider takes legal action against you, we will not be allowed to include that debt account to the debt review process.

You will have to deal with that account as a separate matter.

Take the first step

If you’re struggling to make ends meet every month due to huge debt bills, sort it out before it’s too late.

The last thing you need is legal action from creditors. Once that happens you’ll have limited option to help you resolve the problem.

You are better off to take action now before things get out of hand.

If you need financial help contact us today. We can help you reduce your monthly debt repayments which will free up some cash for living expenses.

Fill in your contact details below and we’ll get back to you as soon as possible.

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We look forward to the opportunity to get you debt-free!

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