Debt review, also known as debt counselling, is a legal process introduced by theNational Credit Regulatorand is part of the National Credit Act (NCA).
The NCA was introduced “to promote and advance the social and economic welfare of South Africans, promote a fair, transparent, competitive, sustainable, responsible, efficient, effective and accessible credit market and industry, and to protect Consumers”.
In other words, to help South Africans who are struggling to pay off their debt. It is responsible for prescribing rules and regulations for the credit industry and sets the groundwork for over-indebtedness and debt counselling.
What does it mean to be under debt review?
If your debt exceeds your income after all your living expenses have been paid, you are likely to be overindebted and mayneed to applyfor debt counselling to commence the debt review process.
While under debt review, your debt counsellor will communicate with yourcreditproviders, on your behalf, to negotiate reduced interest rates and repayment terms. When your payment plan has been finalised and approved, you will start to pay off your debt in agreed monthly instalments.
While under debt review, you are not able to access any credit products such as loans orcredit cards.
Being under debt review takes time
Thedebt reviewprocess can be a long one – it can take up to five years to complete it. At the end of the process, when your debt has been repaid and your debt counsellor has received paid-up letters from all yourcreditproviders, your debt counsellor will issue you with a clearance certificate. This certificate is sent to thecreditbureaus within a few working days and you will then be ‘unflagged from being over indebted’ and your credit record will be updated accordingly.
Then you can move onto a healthier way of spending and using credit andbuild up your credit scoreagain.
You can’t take out more credit
Once you are under debt review, you agree to pay off your debts as per your finalised payment plan. You also agree to not take on any additionalcreditfor as long as you are under debt review, which can take years.
Being under debt review will reflect on yourcredit record and your chances of qualifyingfor another credit product are very low because of this. It is only once you have completed your debt review and received your clearance certificate, that you canapply for credit again.
The role of credit providers such asFASTAis to ensure a consumer is not approved for a loan if it will cause any financial burden. FASTA will always actresponsibly and never offer you more creditthan you can afford to repay.
In a nutshell
While the debt review process can be a lengthy one, it can help in ensuring you commit to making payments on time, learn to better manage your debt, and complete the process with acredit scorethat you can continue working on. Discipline is required but if you can commit to paying off your debt, your efforts will pay off in the longterm.
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