What is Debt Counselling?

Debt counselling is a process designed to assist individuals who are struggling with debt. It involves providing financial advice, education, and support to help people manage their debt more effectively. The process was formally introduced in 2007 by the National Credit Act and is a closely managed debt solution.

Through debt counselling, individuals can learn how to budget, reduce expenses, and negotiate with creditors to create a manageable repayment plan. The ultimate goal of debt counselling is to help individuals pay off their debts and achieve financial stability.

Our debt relief process will help a client that is struggling to pay his debt by negotiating lower monthly instalments and interest rates with the credit providers. This will ensure that the client will be able to settle his debt while only paying what he can afford.

The process typically involves several key steps:

1. Assessment: A debt counsellor assesses your financial situation to determine if you are over-indebted and eligible for debt counselling.
2. Notification: Your debt counsellor notifies your creditors that you have applied for the process, which provides you with legal protection from harassment and repossession.
3. Budgeting: You work with the debt counsellor to create a budget that ensures your basic needs are met while setting aside funds for debt repayment.
4. Negotiation: The debt counsellor negotiates with your creditors to lower interest rates and extend repayment terms, consolidating your debts into a single, reduced monthly payment.
5. Repayment Plan: You make regular payments to a Payment Distribution Agency (PDA), [we use Hyphen PDA] which then distributes the funds to your creditors.
6. Completion: Once all debts are paid off, you receive a clearance certificate, and the debt counselling flag is removed from your credit profile.

• Consolidated Payments: The debt review process will combine all of your debt instalments into one easy, consolidated payment .
• Asset Protection: The process prevents the repossession of assets like your home and car.
• Creditor Negotiations: Debt counsellors handle communication and negotiations with creditors, reducing harassment.
• Credit Restrictions: While under debt counselling, you cannot take on new credit, which prevents further debt accumulation.

• Eligibility: Not everyone qualifies for this debt management process. Your unique circumstances will have to be assessed to see if you qualify. If you do not qualify, we will suggest alternative options.
• Potential for Scams: It’s important to work with a legitimate, NCR-registered debt counsellor to avoid scams. You can always ask the National Credit Regulator (NCR) if a company is registered.
• Associated Costs: There are fees involved in debt counselling, but they will not compromise your living expenses.
• Limited Coverage: Debt counselling may not include all debts, especially if legal action has already been initiated by creditors.

• When selecting a debt counsellor, ensure they are registered with the National Credit Regulator (NCR) and have a transparent fee structure. Reputable counsellors will provide a full disclosure of their fees upfront and explain the entire process before you commit. Do your research, ask a lot of questions, and if the company is reluctant to answer your questions, go to someone else.

  It is also advisable to ask if the company is registered with the Debt Counsellors Association Of South Africa (DCASA) This will just give you a bit more reassurance that you will get the service you deserve.

Debt counselling can be a valuable service for those overwhelmed by debt. It offers a structured approach to debt repayment and financial education. However, it’s crucial to understand both the benefits and limitations before entering the process. Working with a reputable and registered debt counsellor is essential to ensure that you receive the support you need to navigate your way out of debt.

For more info, give us a call or complete the call me back form on this page. We will gladly answer any further questions you might have.  You could also have a look at this article.