- If you are feeling over-indebted, there is help through a debt review
- Going under debt review has helped many South Africans to get back to financial freedom
- Getting more loans under debt review is complex and not encouraged; always get assistance from your Debt counsellor if you face economic challenges
Can l get loans when l am under debt review?
Yes, you may get loans even if you are under debt review. Even though most of the registered lenders are not willing to give out loans to people under debt review, some lenders may be willing to give you money outside the formal and legal procedures, but that is not encouraged. If you are in this process, you may feel like your life has turned upside down, but don’t worry; you are in the best way to regain your financial freedom.
It may feel like you have lost most of your day-to-day spending, like getting loans, buying on credit, buying a new car, etc. All this consumption may require approval from your councillor.
Thank God you will still be able to live your everyday life while attaining financial freedom with the assistance of the Debt counsellor, as we shall explain below. By reading this short article, you will fully understand the process of debt reviewing and how best you can survive if you are already under it. We will also help you know your life if you take this excellent decision and apply for a debt review.
Requirements for a debt review loan
Loans for people under debt review are not easy to get, and when you get one, it is vital to consult with the Debt counsellor to ensure that this will not be a new burden to you. Debt counsellors and some lenders often prefer not to allow you to take new loans.
Under debt review, your profile will be flagged/blocked across all registered lenders. Registered lenders consider it unacceptable and unethical to give you a loan when you are under such conditions.
All this means is that you can qualify for a loan once the court has cleared all your financial problems.
Your sole option must be in loan sharks, not in the consent of the Debt collector, the court or other lenders you owe money to. However, if both the lender and the Debt collector agree, you may take a loan. Here are the requirements you need to have.
Why you should not consider taking new loans
- Salespeople are almost all the time giving you fake promises.
More than often, Sales people from companies that offer credit or loan sharks may provide you with tempting deals. One condition, however, is that you must come out of the review and deal with them. It would be best if you remembered that they sought to exploit you and make more sales.
They lure you out of NCA’s safe hands and exploit you when you have no one to assist you. The last thing is that you will find yourself under more financial stress than you have been before.
- Coming out of debt review does not mean you can get loans legally.
Once you are listed and the court is aware, no registered lenders will clear your profile even if you come out of debt review. This means you will only have options from loan sharks and get higher interest rates on short-term loans. You will only wish you did not come out of debt review before you are financially free.
What is Debt Review
Debt review is a journey whereby South Africans who have fallen into severe indebtedness are crippled by debt, failing to pay and getting assistance to get back to financial freedom. The National Credit Act (NCA) is the body that helps such people until they have successfully recovered from the financial trouble they had brought themselves in.
In this process, the Debt counsellors follow guided procedures to make sure that they protect the struggling person from the onset. They also walk through the recovery journey with the person helping them to become financially free again.
Undoubtedly, this had been an excellent route for many South Africans who struggled to clear their debts. The majority of people that chose this path have not fallen into over-indebtedness after the process. With proper and professional guidance from qualified Debt counsellors, you will come out of debt review with a fresh understanding and spending habits.
The debt is reviewing process in South Africa.
The whole point of debt reviewing (debt counselling) is to make the patient follow structured behaviour regarding his borrowing and spending habits. One thing is guaranteed: you will be a much better person after the process.
Debt review Application process
- Look for a Debt Counsellor
Once you have decided to go through this stress-relieving process, make sure to find a Debt collector who will help you. They will then guide you and talk to you about the path you have decided to take. The collector must be actively registered with NCR/NCA.
Dealing with an unregistered Debt Collector may bring problems for you during the process. You may end up losing money in case they are scams.
Fill out the application form.
After you have found a Debt Collector to deal with, he will give you the application form you must fill in honestly. This form is called Form 16.
Below are the documents you must fill out the form and attach to the state.
- South African National ID
- Six months bank statements
- Financial statements are readily available
- Power of attorney authorizing the Debt Collector
- Six months payslips
The Debt Counsellor assess your financial position.
These documents will help the Debt Collector to assess if you qualify to be under debt review. He will structure your payment plan with bearable monthly instalments if you are eligible.
During the process, the Debt Counsellor will also look for reckless lending. This process will take 30 working days for the Debt Counsellor to fully gather all the information they want.
Notify the lenders and all credit providers of your decision to go under debt review.
After receiving the application form, the Debt Counsellor will notify all the interested parties, i.e. all the lenders and credit providers, with outstanding loan balances. This process will be done through the 17.1 form within the first five days after the Debt Counsellor receives your application.
This process will confirm the outstanding balances from all the providers through the Certificate of credit (COB).
The Certificate of balances will consist of the following.
- Full names of the provider
- Provider’s full details, including the registration number
- Account type and number
- Credit terms like Outstanding balance, monthly instalment and interest rate
- Arrears amount and insurance amount
After receiving all the COB from all credit providers, the Debt Counsellor will draft proposals to all the providers about the new repayment terms.
NCA reviews your application and declares you over in-debted
After gathering all the information required from all the parties involved, the authorities assess your situation and advise you over in-debted, or you may fail to qualify.
If you are declared over in-debted, the Debt Counsellor will issue proposals outlining the below information.
- The credit provider’s full name
- Their account number and the outstanding balance
- Original credit terms before the debts are reviewed, i.e. interest rate, tenure and monthly instalment amount.
- Proposed credit terms after debt review, i.e. interest rate, tenure and monthly instalment
- The nature and way in which the outstanding balances will be repaid
- The amount of time spared for the debt to be repaid under debt monitoring and counselling
After noting all the proposed ways by the Debt Counsellor, the credit providers shall respond by accepting or providing alternative offers. This will happen within ten working days.
Consent order application and debt restructuring
Once the Debt Counsellor agrees with the credit providers, he will approach the court seeking a consent order. This will protect you, and no credit provider will launch legal action against you for the first 60 days.
Putting into practice the restructured debt to a Payment distribution agent (PDA)
Once everything is done and dusted, you will start paying the distribution agent a lump sum/total monthly debt.
The Payment distribution agent will be responsible for paying several providers without any hustle for you. They will not as well ask you for any fees since most of the communication will be done between the counsellor and the providers.
What happens if you default on payments while under debt review?
Default under debt review means failure to meet either of the below pre-agreements.
- You have paid the monthly payment that is less than the agreed amount
- If you pay after the agreed specified date is past
- If you fail to pay the instalment at all
If this happens, the lender/credit provider may call off the debt review contract and seek legal action against you under the National Credit Act’s section 18(10) and section 18 (30). This entails saying that the credit provider may approach the courts and summon you independently outside debt review.
They will no longer be asking for the instalment you were supposed to pay that month but the total outstanding amount. In this case, if you have taken a home loan, you may be on the verge of losing the house that was attached as collateral.
If you agree with the credit providers who came out of debt review, their repayments will no longer go through the NPA but will pay them monthly as your expenses.
If one or so providers decide against moving out of debt review out of your default, that doesn’t mean that other providers will not remain under the debt review contract. Hence it would be best if you only continued to work with the Debt counsellor to clear all your debts.
This, however, will mean that the debt review accounts arrangement will be terminated, and the Debt counsellor will make a new structure of payments that factors the changes to the credit providers’ new position.
Can l exit debt review once l join?
Once you have paid up all your outstanding debts, except for bonds, you will be automatically out of debt review. The Debt counsellor will give you a certificate of clearance that confirms that you are now debt free.
This confirmation will mean that all registered credit providers who blocked you will make you accessible. You can now go and take more credit if you wish to do.
It is not true that there will be added time for rehabilitation that you go through when you finish paying your debts. You will only be under debt review if it takes you to clear all your debts.
Other than paying up all your debts, you may come out of debt review through an application to the court saying that you are no longer indebted. In this application, you may need to detail why you say you are no longer indebted—the ways and routes you may use to repay your debts.
Interest rates and charges for Debt review loans in South Africa
More often than, lenders who give out loans for people under debt review are aware of your desperation. They know that you are likely to pay more than usual to get the money to finance your day-to-day needs as you adjust to a new way of life monitored by the Debt Counsellor.
As a result, loan sharks that offer loans to people under debt review are aware of the risk of default; hence they compensate for this with an induced interest rate or fees. Arguably debt review loans are the most expensive loans in South Africa.
Ways of avoiding Debt review
Do not buy unnecessary stuff.
Many people get too excited to spend high when they have money. They buy things they don’t need, like spending too big on clubs or expensive luxurious stuff they can not maintain.
Financial discipline is the most important attribute that can keep you out of debt review in the first place. Avoiding over-indebtedness is much better and more accessible than trying to work your way out.
Once you realize that you may have saved so much if you did not spend this much. This may look like an easy way to avoid overspending by considering your expenditure and adjusting. However, once you realize this, the real challenge starts when you struggle to adjust.
More than often, you will claim that you live each day by itself and go back to your old ways, even deeper into your poor spending habits. You must consider including your spouse in this exercise that you must go through as a family.
Adjust your lifestyle to your financial capacity.
One of the main reasons people fall into debt review is the inability to adjust to changes in their financial power. It may look stupid and crazy to realize that the friends you used to have when you had more money need to be replaced by new friends of your unique financial capacity, but it is the need.
This is also a challenging exercise that demands so much commitment. Imagine hanging out with people who have been used to be spoiled by you, and you now tell them that you are no longer financially strong to do what you used to be doing.
This will affect your status and pride, but it is a necessary step to go through. Don’t fall into the pressure of taking a loan to sponsor luxurious wants.
Avoid taking new loans when the pressure to pay previous loans mounts.
When you are used to walking through the credit provider or lender’s door seeking money, it feels like a quick solution, but remember, it’s only an immediate solution that will come for you stronger tomorrow.
Most people who end up over-indebted will be taking more and more loans and even paying up old loans with new loans. This will only pile pressure and stress for you in the future, and you will fail to pay them all.
Consider proper budgeting
This is the best way to remove all the temptations of having money in your hands. Planning and drafting a budget and sticking to it may help you avoid making financial decisions under pressure.
It means if you are going out for drinks or on holiday, you will only take a certain amount that has been budgeted for. If that money is depleted, there is no way back because you only have a certain amount.
In budgeting, you should closely monitor your cash inflows from people who owe you. Timely payment from people who owe you may help you to pay your instalments in time. This will ease the pressure on you.