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Under Debt Review? Here's What You Need to Know
Mondo Admin / 09-01-2023 / Financial News
Undergoing debt review is sometimes seen as a punishment. But, while it can seem overwhelming, it is an essential way of getting your debt in order and living a financially stable life.
Here’s what you need to know about debt reviews.
What is debt review?
Debt review is a legal process through which a person who has too much debt gets help to manage it and pay it all off. It is structured so that the person in debt is still able to meet their basic needs while paying off the money they owe without accumulating further debt.
There are a number of ways the debt review process can be started. You can receive a referral to a debt counsellor by a magistrate court, the National Credit Regulator or by the companies you owe. You can also take steps to undergo debt counselling yourself.
If you’re looking for a registered debt counsellor, you can find one on the National Credit Regulator website’s database. You can also use the site to check whether a counsellor you have found by other means is registered and qualified to practise.
The first thing your debt counsellor will do is assess your financial situation to check if you qualify for debt review and then help you negotiate with your creditors for more affordable repayments if you do. If you’re married in community of property, you will have to undergo the application with your spouse.
Benefits of Debt Review
Debt review is designed to help you regain control of your finances if you reach a point where you become consumed by your debt and see no other way to resolve the situation. If you qualify, your counsellor can help you to secure repayment terms that you are actually able to afford, and your creditors will legally not be allowed to take legal action against you while you are under debt review. It can also ease the impact on your credit score by helping you avoid bankruptcy.
Downsides of Debt Review
Despite the intended benefits of debt review, there are some downsides. There are some costs associated with going into debt review. You will have to pay debt counselling fees as well as any related legal fees that may apply. You will not be allowed to apply for new credit while undergoing the process until your counsellor issues you a debt clearance certificate confirming that you have cleared all your debt. After you have paid off your debt, it may take about two years for the “debt review” to stop reflecting on your credit report. This would affect your credit rating, which limits your access to certain forms of credit such as loans, property rentals and favourable interest rates. The set-up process can also take several months to complete before your repayment routine kicks in.
If the opportunity arises, you can speed up the process by paying extra as long as you are not doing so in a way that impacts your financial stability or which leads you to dishonouring one debt to quickly pay off another. Keep your counsellor in the loop if you decide to do so. They can assist you in figuring out which debt is best to service with any extra money you can come up with to maximise the benefits of paying extra.
Remember that debt review is a process that also has a significant psychological impact. Seek counselling or the support of loved ones to help you on your journey towards a debt-free life.
