The National Debt Counsellors’ Association answers commonly asked questions
South Africa’s economy, which was struggling before the Covid-19 epidemic, is now reeling and the consequences are dire for consumers.Benay Sager, chairman of the National Debt Counsellors’ Association says that for many people in this situation debt counselling could help them take back control of their financial affairs.
What exactly is debt counselling and is it something I should consider?Debt counselling helps people repay their outstanding debt through an affordable payment plan that is agreed with their creditors.
Who can apply?
Anybody who is unable to pay their debt and has a source of income can apply.
How do I choose a debt counsellor?
All debt counsellors must be registered with the National Credit Regulator. You can check if the counsellor you are considering is registered here:https://www.ncr.org.za/register_of_registrants/registered_dc.php. Ask if the debt counsellor uses the Debt Counselling Rule Set (DCRS) system. It is the industry gold standard and benefits consumers and creditors alike by significantly lowering interest rates and the time it takes to complete the process.
What type of debt is included?
Can I include my municipal, school or company debt? All credit that is granted as part of the National Credit Act, such as bonds, vehicle finance, personal loans and other types of debt can be included in debt counselling. Unfortunately, municipal and NSFAS debt cannot. Nor can company or other non-personal debt.
What happens to my house and car if I apply for debt counselling?
Bond and vehicle repayments can be included, so you don’t risk your home or car being repossessed during the process. For bond repayments, interest and payment amounts are reduced for the term of the debt counselling process. Once completed, the interest and repayment amounts revert to their original values.
How do the repayments work and what does it cost?
You will make one affordable payment each month, based on what you can afford. This is paid to an independent Payment Distribution Agency (PDA) – overseen by the National Credit Regulator – which distributes money on your behalf to your creditors.
How long does debt counselling take?
It usually lasts between three and five years.
Can I still apply for credit while under debt counselling?
No. Only once you have completed the programme and receive a clearance certificate.
Will I be blacklisted if I apply for debt counselling?
When people get behind on their payments, this negatively affects their credit score. Lenders and other financial-service providers are reluctant to lend or do business with people who have poor credit scores as they are considered higher risk.
If I’ve successfully completed debt counselling will I be able to get credit again?
When you have paid up all your accounts – except your home loan, which must be up to date – a reputable debt counsellor will use the paid-up letters from creditors to create a clearance certificate. This, along with the paid-up letters, is then sent to all the major credit bureaus. The debt counsellor then updates your debt-review status to ‘clearance’ on the National Credit Regulator’s.
For more information about debt counselling and the National Debt Counsellors’ Association visit: ndca.org.za