Debt review is an important financial resource for many South Africans struggling with excessive debt. However, false beliefs and misunderstandings about debt review can prevent people from seeking the help they require.
This blog seeks to dispel these misconceptions by offering reliable information and a clear explanation of the debt review procedure. By clarifying the advantages and realities of debt review, our goal is to equip you with the knowledge to make educated choices about your financial well-being.
Discover the truth about debt review and start the journey towards managing your finances effectively.
Myth 1: Debt Review is the Same as Being Blacklisted
Many people believe that entering debt review will permanently damage their credit score. While it’s true that your credit report will be flagged during the process, this is only a temporary measure.
The Truth
- The goal of debt review is to help you get out of debt in a responsible and manageable way. The flag on your credit report serves to alert creditors that you are actively working towards becoming debt-free and have agreed to restrict yourself from taking on new credit.
- Once you have successfully completed the debt review process, the flag will be removed, and your credit score can begin to recover. This temporary flagging is a small step towards achieving long-term financial stability.
Myth 2: Debt Review Will Seize My Assets
Many fear that entering debt review will result in losing their assets, such as their home or car. Instead, debt review does the opposite. It protects your assets. This myth often leaves individuals vulnerable to asset repossession due to missed payments.
The Truth
- Debt review aims to prevent the repossession of assets by making debt repayments manageable.
- The process is designed to help you keep your assets by restructuring your debts into a single, affordable monthly payment. According to Article 129 of the National Credit Act, creditors are required to notify you before taking legal action. Thus giving you the opportunity to seek debt review and protect your assets within 10 working days of receiving your Article 129 notification.
- As long as you adhere to the new payment plan, your assets, such as your home and car, are protected from repossession.
Myth 4: Debt Review is a Scam
Some people believe that debt review is a scam or a scheme designed to take advantage of vulnerable individuals. This myth can cause mistrust and prevent people from seeking legitimate help, prolonging their financial distress.
The Truth
- Debt review is a highly regulated process under the National Credit Act. It is designed to offer genuine financial relief and is overseen by registered debt counsellors.
- Always ensure you work with a debt counsellor who is accredited by the National Credit Regulator (NCR).
Myth 5: Debt Review is a Permanent Stigma
There is a misconception that once you are under debt review, it will permanently damage your financial reputation. This belief can discourage individuals from entering debt review, fearing long-term consequences even after they have cleared their debts.
The Truth
- Debt review is not a permanent status. Once you have completed the process and settled your debts, the debt review flag is removed from your credit profile.
- The main goal of debt review is to rehabilitate your financial health and improve your creditworthiness over time.
Myth 6: Debt Review is Expensive
Some believe that debt review is a costly process that will add to their financial burden rather than relieve it. Debt review is designed to ease your financial burden, not add to it. The process includes a fee structure regulated by the National Credit Regulator (NCR), ensuring transparency and fairness.
The Truth
- Debt review fees are regulated by the National Credit Regulator (NCR) to ensure they are transparent, fair and affordable. The fees are incorporated into your restructured monthly payment, ensuring you only pay what you can afford.
- By restructuring your debts into a single monthly payment, debt review aims to reduce financial stress and prevent the accumulation of further debt.
- In some cases, seeking debt review can actually save you money in the long run by avoiding high interest rates and additional penalties from missed payments.
Myth 7: You Can’t Get Credit After Debt Review
There is a widespread belief that once you complete debt review, you will never be able to access credit again. This is simply not the case. We have helped thousands of South Africans go on to build healthy credit scores with access to the best interest rates.
The Truth
- After successfully completing debt review you will be issued a clearance certificate. This certificate will allow you to remove the flag from your profile.This is usually done within 21 days.
- A clearance certificate can only be issued once all your debt has been paid off, excluding a property bond, which must be up to date. You will be eligible for a clearance certificate once all paid-up letters have been received.
Myth 8: Debt Review is a Quick Fix
Some people think that debt review is a quick solution to their financial problems, expecting immediate results. This misconception can lead to unrealistic expectations and disappointment when the process takes time.
The Truth
- Debt review is a structured process designed to provide long-term financial stability. It involves a detailed assessment, negotiation, and restructuring of your debt.
- Depending on how much debt you have, and your unique financial situation, debt review can take between 3 to 5 years.
- Debt review requires patience and commitment, but it offers a sustainable and affordable path out of debt, while providing financial relief and protection from creditors.
Myth 9: I Can Stop and Start My Debt Review as I Please
Contrary to popular belief, once you enter the debt review process, it is not as simple as stopping and starting at will. South African laws surrounding debt review are designed to provide structure and protection, ensuring that both the consumer and the credit providers have a fair and transparent process.
The Truth
The debt review process can only be terminated under specific conditions:
- Court Order: If a court declares that you are no longer over-indebted, the debt review process can be terminated.
- Settlement of Debts: If you settle all your debts, excluding your bond (which must be up-to-date), the debt counsellor will issue a clearance certificate.
How we can help!
Taking charge of your finances is a powerful move. If you’re battling debt, don’t be afraid to explore debt review as a potential solution. By clearing up these myths, we hope you feel empowered to make informed choices about your financial well-being.
Seeking help is a sign of strength, not weakness. For a free consultation and to see if debt review aligns with your goals, visit Debt Rescue and take control of your financial future today!
Are you struggling with debt while earning an income? If so, let our expert debt counsellors provide a no-obligation, cost-free assessment to consolidate and reduce your monthly repayments for immediate financial relief.
Contact us to speak with our expert counsellors and start your journey toward financial freedom.
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