How does the debt counselling process work?

Debt counselling is a formal process prescribed by the NCA.

In order for any consumer to benefit from debt counselling it is imperative that all the formal requirements are adhered to.

In order to apply for debt counselling, the consumer must approach a debt counsellor.

A debt counsellor is a trained professional person who must be registered with the National Credit Regulator (NCR) to assist consumers with debt counselling. This information can easily be verified by contacting the NCR or visiting:

http://www.ncr.org.za/register_of_registrants/dc.php

The debt counsellor will complete an application form with you in order to assess your current financial ability. This is the first step in the formal debt review application.

During the first consultation the debt counsellor will also explain the process in detail and give practical guidance to the consumer.

All the consumer’s credit providers will be notified of the application as well as the credit bureaux. The credit providers will correspond directly with the debt counsellor in order to obtain all the information needed to finalise the process.

After the debt counsellor has calculated the consumer’s new monthly repayments it is sent to all credit providers.

In order to finalise the process the debt counsellor will obtain a court order effectively restructuring the consumer’s debt.

The consumer may not enter into any new credit agreements while under debt counselling.

For the duration of the consumers debt counselling the debt counsellor will monitor all payments to the credit providers and review the payments annually.

Common misconceptions regarding debt counselling

Debt counselling is a short term solution – false

Debt counselling offers a long term viable solution for over-indebted consumers until such time as the consumer is no longer over-indebted or all debt has been repaid.

Even if you apply for debt counselling, your credit providers will take legal action – false

As long as all formal requirements have been adhered to by the debt counsellor and the consumer no legal action will be instituted against the consumer. The consumer is also protected by a court order.

It will take forever to repay your debt under debt counselling

It is up to the individual and their affordability that will dictate the repayment term. The less you repay, the longer the repayment term will be.

The debt counsellor will also negotiate on your behalf with the credit providers to reduce interest rates and effectively shorten repayment terms.