Debt review, implemented by the National Credit Act (NCA) in 2007, has been essential for South Africans facing financial difficulties. Debt Rescue has successfully helped thousands of clients avoid blacklisting, safeguard their assets, and regain control of their financial situation.
It is important to understand both the benefits and disadvantages of debt review. This will help you in making an informed decision about whether this process is right for you.
Let’s explore the pros and cons of debt review.
Benefits of Debt Review
1) Reduced Monthly Payments
- Debt review offers a significant advantage by consolidating all your financial obligations into one reduced monthly repayment.
- This reduction is negotiated with your creditors, ensuring that your new repayment is affordable and leaves room for necessary living expenses.
- Through this process, Debt Rescue has consistently helped clients better manage their finances.
2) Protection from Legal Action
- Once you enter the debt review process, the law protects you from legal action by creditors.
- Under the NCA, creditors can no longer send legal notices or take steps to repossess assets as long as you’re under debt review.
3) No Permanent Record at Credit Bureaus
- One of the key benefits of debt review is that once you’ve completed the process, there’s no permanent record on your credit profile.
- After you have paid off all your debt, your counsellor issues a clearance certificate, and the flag on your credit profile is removed.
- This allows you to rebuild your credit history without any lasting negative marks on your credit score.
4) Ability to Maintain Assets
- Unlike sequestration or liquidation, debt review allows you to keep your home and car. This is a significant benefit, especially for individuals at risk of losing their assets and belongings due to unpaid debt.
- Debt Rescue’s approach is designed to protect what matters most to you.
5) A Clear Path to Being Debt-Free
- Debt review offers a structured and manageable path towards financial freedom.
- With a clear plan, you’ll know exactly how much you need to pay each month and how long it will take to settle your dues.
- Typically, the process can take anywhere between 3 to 5 years, depending on your financial circumstances.
- This ensures a way out of debt that is both realistic and achievable.
6) Immediate Relief
- One of the immediate advantages of debt review is the instant relief it provides.
- As soon as the process begins, you no longer have to struggle with juggling various creditor payments, dealing with late fees, or responding to aggressive creditor demands.
- The consolidation of payments offers immediate financial breathing room.
Disadvantages of Debt Review
While debt review provides numerous advantages, there are certain debt review disadvantages that should be considered.
1) You Must Qualify
- Not everyone can qualify for debt review. To be eligible, you or your spouse needs to meet specific criteria under the NCA, including being over-indebted and having a steady income.
- If your counsellor determines that you are not over-indebted, you will not qualify for the process.
Calculate whether you qualify for debt review
2) Restricted Access to Credit
- While under debt review, you won’t be able to access new credit.
- Your credit profile is flagged, meaning you can’t take out loans, credit cards, or additional credit until you’ve completed the debt review process.
3) Length of the Process
- The process can be lengthy, often taking several years to complete.
- For some individuals, this extended timeframe may feel restrictive, particularly when they are not able to access new credit.
- However, the duration depends on the amount of debt, the repayment plan agreed upon, and how committed you are to making your monthly payments.
Debt Review is a Legal Solution for Regaining Financial Stability
Debt review is an effective and legally protected way to manage your debt. For many South Africans, it provides an opportunity to regain financial stability, avoid legal consequences, and ultimately achieve a debt-free life.
By weighing the advantages and disadvantages of debt review, you can make an informed decision about whether debt review is the right solution for your financial circumstances.
