Debt review, also known as debt counselling, is a legal process introduced by the National Credit Regulator and is part of the National Credit Act (NCA).
The NCA was introduced “to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect Consumers”.
In other words, to help South Africans who are struggling to pay off their debt. It is responsible for prescribing rules and regulations for the credit industry and sets the groundwork for over-indebtedness and debt counselling.
What does it mean to be under debt review?
If your debt exceeds your income after all your living expenses have been paid, you are likely to be overindebted and may need to apply for debt counselling to commence the debt review process.
While under debt review, your debt counsellor will communicate with your credit providers, on your behalf, to negotiate reduced interest rates and repayment terms. When your payment plan has been finalised and approved, you will start to pay off your debt in agreed monthly instalments.
While under debt review, you are not able to access any credit products such as loans or credit cards.
Being under debt review takes time
The debt review process can be a long one – it can take up to five years to complete it. At the end of the process, when your debt has been repaid and your debt counsellor has received paid-up letters from all your credit providers, your debt counsellor will issue you with a clearance certificate. This certificate is sent to the credit bureaus within a few working days and you will then be ‘unflagged from being over indebted’ and your credit record will be updated accordingly.
Then you can move onto a healthier way of spending and using credit and build up your credit score again.
You can’t take out more credit
Once you are under debt review, you agree to pay off your debts as per your finalised payment plan. You also agree to not take on any additional credit for as long as you are under debt review, which can take years.
Being under debt review will reflect on your credit record and your chances of qualifying for another credit product are very low because of this. It is only once you have completed your debt review and received your clearance certificate, that you can apply for credit again.
The role of credit providers such as FASTA is to ensure a consumer is not approved for a loan if it will cause any financial burden. FASTA will always act responsibly and never offer you more credit than you can afford to repay.
In a nutshell
While the debt review process can be a lengthy one, it can help in ensuring you commit to making payments on time, learn to better manage your debt, and complete the process with a credit score that you can continue working on. Discipline is required but if you can commit to paying off your debt, your efforts will pay off in the long term.
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