Hard times or unwise spending may put you in a challenging financial situation. Debt counselling services can be your first step towards experiencing financial freedom again. This option was made possible in 2007 by the NCR (National Credit Regulator) so you have an alternative to being sequestrated. Debt counsellors handle creditors, aim to reduce interest and plan payment plans for clients.
Popular Debt Counselling Services Include:
Decisions on whether applicants are over-indebted
The laws in South Africa don’t automatically make everyone eligible for debt counselling. To be declared over-indebted by the courts so your creditors can stop persecuting you, there are certain requirements. Your debt counsellor will determine your level of debt and make a declaration accordingly.
Communication with creditors
Debt counselling requires a lot of communication between the counsellor and the creditors. The counsellor offers creditors a payment and interest option, but creditors have the option to reject it or suggest alternatives. Your counsellor handles the process so you can focus on adjusting to a new lifestyle.
Working out a payment plan
Debt counsellors take your debt, salary and monthly expenses into consideration. They create a payment plan which will result in your creditors being paid, while you’ll still have money for basic requirements. They take prices and interest rates of the South African economy into account to ensure the plan is realistic. Payments to creditors are usually handled by a third party Payment Distribution Agency (PDA).
Handling the courts
To draw the benefits of this process, you need to be declared as being under debt counselling by South African legal entities. A debt counsellor handles your application to the NCT (National Consumer Tribunal) or magistrate’s court after your creditors agreed to abide by the process.
Draw up a budget
Life in South Africa can be expensive, but debt counsellors help you draw up a realistic budget so your family can still survive in spite of paying off debts.
5 Tips When Hiring a Debt Counsellor
1. Ask about fees
Even though debt counsellors help you manage your financial challenges, these individuals still charge you for their services. Avail yourself of all applicable fees so you’re not caught off guard:
- Application fees
- Rejection fees
- Debt Counsellor’s fees
- After-care fees
- Legal fees
2. Confirm which debt will be handled
Your debt counselling process doesn’t automatically mean all your troubles are sorted out by someone else. Discuss with your debt counselling company which debts will be handled so you know which institutions you may still have to handle on your own. Creditors also have an option to withdraw from the process if they wish, so make sure your debt counsellor keeps you updated with changes all the time.
3. Ask for the counsellor’s registration
Only registered individuals can offer debt counselling services. You have the right to ask for a registration certificate. Make sure the NCR logo appears on the paperwork along with the counsellor’s NCRDC number.
4. Confirm payments to creditors
Don’t assume your debt counsellor does everything right. Make sure that payments are made to your creditors by checking monthly statements. Scammers can steal your money or an overworked PDA can neglect payments which will have repercussions for you.
5. Be mentally prepared
Debt counsellors handle a tough process on your behalf. This doesn’t mean it will be easy. Prepare mentally by making peace with the new lifestyle you will lead. Accept that you can’t change the situation so you have less emotional resistance to your new budget.