Can I Get A Loan While Under Debt Review?
Debt review and obtaining credit.
Debt review is a programme that helps you manage your debt and get out of it. A legally certified debt counsellor can help you negotiate settlements or set up payment plans. This helps you manage your debt and work towards your goal of becoming debt free.
If you’re struggling to make your debt repayments, debt review may be the right solution to assist you in managing your debts.
Most often, people get caught up in the negative stigma associated with debt review. Some people mistakenly believe that it is a costly service. It is important to remember that debt review is budget-friendly.
Signing up for debt review means you are willing to address your obligations head on and that you have every intention of paying everything back right away as soon as cash flow becomes easier.
The debt review process.
The debt review process usually happens in 8 steps:
- The consultation: The first step is to consult with a reputable debt counsellor. They will work out your current financial position by looking at your income vs living expenses. This is done to gain a better understanding of your debt exposure. If you are over-indebted, a debt counsellor will help you work with the best solution for reducing or eliminating the debt.
- Assess and Plan: After your debt counsellor has had a look at the basics, they will take care of submitting an application for you. This collects all your personal information, income, expenses and debts you may have incurred.
- Inform the creditors: Once you have applied for debt relief, your debt counsellor will send a notice to all your creditors informing them that you are attempting to renegotiate your debt. They will also ask your creditors to send what is known as a Certificate of Balance (COB) as a means of confirming the amount of monies owed.
- Inform the NCR: During this step of your debt counselling, your debt counsellor will list you on the National Credit Bureau’s NCR Debt Help database. After doing so, an NCR number will be given to you as confirmation that you have applied for debt review.
- Inform the credit bureaus: After applying for debt review, the NCR will notify consumer credit agencies that you have requested this and will monitor your activity to prevent credit being issued to you by anyone else.
- Repayment proposal: The following repayment proposal will display a list of all credit providers, their outstanding balances as per the COB received, the offered instalments and interest rates, and the term of repayment for your debt review.
- Negotiation: The debt counsellor and the credit providers negotiate the repayment terms of the proposal. If all are in agreement, they will then refer it to the National Consumer Tribunal for approval. If one or more credit providers do not consent to the proposal, the matter will be referred to a Magistrate's Court for adjudication. Once a settlement has been agreed upon, a court order is lodged detailing your repayment plan and creditors’ consent.
- Start the repayment process: As soon as you begin your debt review payments, you no longer have to directly pay your credit providers the standard contractual payment amounts each month. Each month you will be directly paying all of your Credit Providers through a Payment Distribution Agent (PDA). This is in terms of the National Credit Act. Each debt counsellor must contract a registered PDA to distribute the payments of its clients to the relevant Credit Providers.
What if you miss under payment under debt review?
Section 86(10) of the National Credit Act states that if payments are not made on time, your creditors can start the legal process by issuing summons against you. This means you will be in default of your debt review court order and your debt counsellor can no longer protect you against legal action, brought against you by your creditors.
Is there a way to exit debt review?
You can withdraw from Debt Review prior to the Form 17.2 Notice being issued by providing written instruction to the Debt Counsellor. Once you have received the Notice, withdrawing becomes much more complicated. Seeing that you are over-indebted to your creditors, you will need to launch a formal court application to prove to the Court that you are not over-indebted. Make sure your application has clear evidence. If it is denied, you may be found guilty of contempt and face penalties.
When will you be debt free?
Once you have settled all your debts, except for your bond, your debt counsellor will issue a clearance certificate confirming that you have settled all the debt and are debt free. This means that you will be able to reapply for credit and start a new financial life once again.
Things that aren’t true about debt review.
- You will be blacklisted if you’re under debt review: Being over your head in debt is a very difficult situation to find yourself in. Sometimes it can feel like there is no way out. Fortunately, however, the National Credit Act was created to provide those who have gotten themselves deep into debt with an option for wiping the slate clean and starting their financial lives anew. The term “blacklisting” has been eliminated altogether.
- Debt counsellors don’t pay creditors: Debt counsellors do not have access to clients’ funds. All payments are handled through a payment distributor as per the National Credit Regulators’ terms and conditions. Their National Credit Regulator manages the client’s payments on their behalf and distributes funds to all creditors as allocated by the court agreement.
- Debt review does not work: Debt management has been a successful and affordable solution for thousands of South Africans trapped in debt cycles that increase the amount owed. The process ensures that all living expenses are taken care of, and that the consumer can live freely without going into any further debt. It’s a good option for consumers with stable income who want to limit their financial stress.
Struggling to budget properly?
Sometimes it is a case of lacking discipline but, in some cases, you just aren’t earning enough. Budgeting is not something that comes easy for everyone. There are several budget apps you can download and use to track your expenses that will help you stay within your established budget. Try those and see how they work for you. If possible, hire a financial advisor to get the help you need.
During debt review, you will be given a chance to get your finances back in order before having to deal with any court action. If you are in debt review, you’ll need to be very diligent with your finances to avoid any legal action. Credit Health is here to assist you should you need any further information regarding debt review. Contact us today.