When Should I go Into Debt Review?

Often clients tell us that if they knew the process of debt review was so simple and effective, they would have applied sooner. I usually ask clients then why did they wait so long.

The most common response is that they did not know whether debt review is an option for them and have heard numerous stories about the process, some good and others not so impressive.

It’s difficult to decide on debt review if you do not have all the facts first.

Here are a few steps to determine whether debt review is right for you or not.

Determine Your Financial Position

This is as simple as checking your bank statement with some highlighters. Mark all the necessary expenses in a colour. Highlight all your debt payments in another colour and all the luxury or “can live without” expenses in a different colour.

Subtract the necessary living expenses and debt repayments from your income. Do you have some money left over?

If yes, it is clearly a matter that you are overspending on luxury items which you can do without. Calculate a detailed budget and start by making provision for your necessities and debt repayments, before adding in your luxuries.

Also, try and save for an emergency fund to ensure you do not have to rely on credit when an unexpected expense arises.

If no, it is clear that you are over-indebted. This simply means that you cannot afford to pay the bare necessities and your debt with your current income.

Do not freak out, it is not as bad as you assume. The National Credit Act was changed in 2007 to assist these consumers. It is most likely that Debt Review is the best option for you. We will reduce your monthly instalments and interest rates to make your debt affordable for you. Click here to read more on how Debt Review Works.

Understand The Misconceptions About Debt Review

Here are some things you might have heard about debt review.

1. OOOOOHHHHH no once you have applied for Debt Review, you will never get out of it again.

This is obviously untrue. After 7 business days of your application for Debt Review, you will receive a copy of the Restructuring Repayment Plan where the number of instalments paid to each account is noted.

The account with the highest number of instalments will be your longest repayment term. Once that account is settled in full, by paying that term, you are then debt free and we will issue you with a Clearance Certificate to confirm this.

Should all your accounts, except for your bond account, be settled you are also eligible to withdraw from Debt Review and pay your bond directly with the Credit Provider, as per your contractual agreement.

Also, should your financial position improve at a later stage and you can once again afford to repay your debt as per your contractual agreement with your Credit Providers, you can launch a Court application to declare yourself no longer over-indebted.

2. OOOOHHHHH no once you have applied for Debt Review, you will never be able to get another loan.

This is obviously also untrue.

Once you have applied for Debt Review and is in the Debt Review program, you cannot incur further debt as you have already declared yourself over-indebted.

You cannot afford the debt you currently have, so how will you be able to afford an additional loan. Subsequent to your application for Debt Review an adverse listing will be noted on your credit profile to confirm that you have applied for Debt Review.

This is only to ensure that “should you forget that you are in Debt Review”, you do not attempt to apply for another loan. But, once you have settled all your debt and you exit the Debt Review process, this listing is then removed from your credit profile and you are eligible to apply for credit again.

3. OOOOOOHHHH no you will pay your debt over a much longer term.

This is also untrue. Although we reduce your monthly debt instalments, we also renegotiate your interest rates in order to keep your repayment terms relative compared to what it is in terms of your contractual agreement.