What is debt review? Can people under debt review take new loans or not? Let's summarise all important information about Debt Review and loans for people under debt review.
If you have acquired debt over a time that has spiraled out of control, and now cannot afford to continue servicing the debt every month, you can apply for a debt review. Once you have applied successfully, you will be registered as a person under debt review.
Although you will have to meet certain criteria which apply to clients under debt review, certain companies may assist you with a short-term loan for any unexpected expenses which arise. Before we expand on those companies which offer these short-term loans, we take a look at what a Debt Review is, how to apply for it, and the advantages and possible pitfalls.
Debt Review – Definition
It is a procedure designed to assist consumers who are having difficulty meeting their financial commitments every month due to their total debt being too much for them to service monthly. A debt counselor of the company that is assisting you with the debt review process, will contact your creditors on your behalf and negotiate payment arrangements, and thereby lowering your monthly payments to a more reasonable level, which you will be affordable monthly.
Debt Review – A further explanation, Benefits, and Drawbacks
In South Africa, the National Credit Act (NCA) of 2007 made it possible for a regulated company to assist clients to perform a debt review for said client. Since that regulation change, debt review has shown to be an incredibly successful method of obtaining debt relief. It has rescued hundreds of South Africans from losing their assets or being blacklisted, and it has enabled them to live without the heavy burden of too much debt hanging around their necks like a tightening noose. It has also enabled them to put more disposable income in their collective pockets, which would have otherwise taken money away from their daily living costs.
However, even though debt review is very successful, particularly in the long term, you should be aware of what to anticipate on your road to financial independence. Here is a summary of the benefits and drawbacks of applying for debt review to assist you in making an educated choice about whether or not to do so.
Debt Review – Benefits
- There is just one set monthly payment. This might sound simplistic in nature, but it is a wonderful benefit for the person who is under debt review. The greater the number of account payments that are due each month, the greater the likelihood that you may unintentionally miss a payment. Even one missed payment may harm your credit score and result in late payment penalties. Thus consolidating and simplifying all the payments into one allows you to change your mindset and become positive about your situation.
- When you submit your debt to a debt review, you no longer have to be concerned about making your monthly debt payment. A debt counselor will make the procedure much easier for you. You simply have one set of lower payments each month that you must make towards reducing your total debt.
- Monthly debt payments have been lowered significantly. One of the primary goals of debt counseling is to assist you in paying off your debts permanently while still providing you with sufficient funds to meet your other obligations. Your debt counselor will lower your monthly debt repayments by extending the length of time you have to pay back your loan. By paying a smaller amount every month, you will be able to afford to pay off your debt while still covering all of your other living costs, if necessary.
- Once you've been placed under debt review, you won't have to worry about receiving any legal letters or phone calls from your creditors. The NCA provides legal protection against creditors for both you and your assets. This implies that creditors will not be able to harass you. Your debt counselor will deal with all of your creditors on your behalf and handle all of the correspondence.
- You will not be blacklisted. You are protected by the NCA while you are undergoing debt review, and therefore credit bureaus will not be able to blacklist you. Once you have completed the debt review procedure, all your credit bureaus records will be expunged, and you will no longer have any permanent record of the fact that you were ever subjected to a debt review.
- Once you have been placed under debt review, your credit profile will be highlighted by the credit reporting agencies. This implies that you will be UNABLE to take on any new debt until the debt review procedure has been completed. This is an excellent strategy to avoid accumulating more debt and to begin concentrating on a debt-free financial future.
- Once you have paid off all of your obligations, you will get a clearing certificate, and the credit bureau will be informed so that the flagged listing may be removed from your credit report. The length of time you are subject to a debt review is determined by several variables, including the amount of debt you presently owe, the interest rate on your debt, and your level of commitment to being debt-free. If you complete the debt review procedure, you will be debt-free.
Debt Review – Possible Drawbacks
- Any South African who has used credit in the past may ask for a debt review, but you may not be eligible for one. To be considered for the procedure, you must fulfill the qualifications established by the NCA.
Debt Review - Requirements
- You must be a citizen of the Republic of South Africa. The National Credit Authority (NCA) established a debt review to assist South African credit consumers in getting out of debt. As a result, you must possess a valid South African identification document or passport to be eligible.
- You must be in a state of financial distress. Debt Rescue can only assist those who are severely indebted. If you do not meet the NCA’s criteria of what constitutes a “state of financial distress”, you could be ineligible for the process.
- You or your spouse must have a consistent source of income. Unfortunately, if neither you nor your spouse has a job, you will NOT be eligible for a debt reduction program. You must have a consistent monthly income to be able to make a fair offer to your credit providers to be considered. If you and your spouse are both jobless, there are other options that you may explore that may be more advantageous to you but unfortunately, debt review may not be available.
Short Term Loans to clients under debt review
If you reside in South Africa and are under debt review, it is ILLEGAL for you to apply for a short-term or personal loan. With a person’s credit profile being flagged across all credit bureaus, the likelihood is slim that any loan, whether short-term or personal, will be approved.
Whenever one applies for a loan, reputable creditors should check the credit history before proceeding with your application. If they work together with the NCA and NCR, they should refuse the application upon seeing the potential client's credit status.
However, a company that advertises that they do offer short-term loans to clients under debt review, is Fidelity Lending Group.
Requirements from the client for the loan to be approved is as follows.
- Copy of ID
- A 3 months bank statement
- Your Latest payslip (they do imply that they can assist without a payslip)
- Blacklisted clients can apply
- No credit check
- Debt review or court order can apply
- Investment Tax Credit can apply
- They also accept clients from other countries (Zimbabweans)
Debt review is not for everybody, and there are many hoops you will have to jump through to qualify to be eligible for the programme. Yes it will be difficult and yes you will require discipline but it is a brilliant initiative and if utilised correctly could be your first step to financial independence.