Debt Management: Benefits of Debt Counselling

Debt counselling involves appointing a qualified debt specialist to help you re-arrange your debt and negotiate better credit terms with your creditors. Appointing a debt counsellor is the first step in the debt management process.

Bear in mind going for debt counselling does not mean that your debt will be written off or extinguished. It is a mechanism used to reduce your debt to the point where it is paid off.

Cyber Finance takes a closer look at the benefits of working with a professional debt counsellor.

#1 What a Debt Counsellor Does

A debt counsellor is a qualified professional that has formal training in debt management and has completed the National Credit Regulator’s (NCR) examination. A registered debt counsellor is registered with the National Credit Regulator.  

All registered NRC debt counsellors are required to meet the following criteria:

• Have a thorough knowledge of the National Credit Act.
• Understand the debt review process and how to identify consumers who require debt review.
• Are able to identify over-indebted consumers.
• Developed the skills to understand credit bureau reports.
• Are able to identify the reckless use of credit.
• Have a good grasp on the process to restructure debt, draft consent orders, and to monitor the spending of consumers.
• Able to offer support services to help consumers achieve financial freedom, who are then issued with a Clearance Certificate.

A professional debt counsellor is armed with the knowledge to advise indebted consumers on how to better manage their expenses and create a simple but effective budget.

Once you have entered the debt counselling process, the counsellor will analyse your finances. The counsellor will create a financial plan based on your income, expenses and debt obligations. This plan will allocate an amount of your income to necessities and the rest will be used to repay your debt. Your debt counsellor will give you an indication as to when the debt will be cleared, based on your financial goals.

All fees charged by debt counsellors are set by the National Credit Regulator and these are built into the single debt repayment amount. This repayment amount will be based on the restructured debt and will be due once this process has been completed. In other words, you, as the consumer pay one affordable monthly amount to an independent Payment Distribution Agency (PDA).

#2  Pay All Your Debt with a Single Monthly Amount

Debt counsellors have extensive experience in dealing with complex debt situations and helping people understand their money and effectively manage their finances.

The information consumers share with their counsellor is confidential and it is not be shared with third parties. Debt counsellors use this information to provide you with relevant, practical advice and support.

There may be more than one option available to solve your financial situation. The NRC-registered debt counsellor will guide you through each available debt solution. Some options such as financial planning, budgeting, money management and bankruptcy may be suggested.

Debt counsellors take the stress out of debt management as they have a clear understanding of how to reduce debt and are clued up on the process to do so. Instead of wasting time trying to figure how to manage your debt, partner with a debt counsellor who can help you create a budget, decide which debts to pay first and how to negotiate better credit terms. Debt counselling helps you to take control of your debt and get your life back.

#3 Pay Less Interest on Your Debt

If your debt has spiralled out of control and you find yourself with so many accounts that you cannot repay, it’s time to consulting with a debt counsellor.

One of the key advantages of using a debt counsellor is that they know how to negotiate better terms with creditors. They do this by negotiating a discount on your debt, securing longer payment terms or obtaining reduced interest rates on the amounts you owe. All your debts are then re-arranged and bundled into one affordable monthly installment.

By sticking to the repayment plan you will be able to regain control over your money and finances.

Debt counsellors are equipped to negotiate better credit terms, give advice and provide clients with the support they need throughout court proceedings. Debt counsellors are also able to provide emotional support should you feel anxious or overwhelmed by your debt.

#4 Benefits of Debt Counselling  

The main benefit of debt counselling is that you are allowed to find actionable solutions to regain control of your income. However, for the debt counselling process to be successful there some key criteria that you need to adhere to.

You need to:

• Commit to the process.
• Be honest and transparent about your finances.
• Convince your spouse to commit to the process with you. If you are married in community of property you will need to apply as a couple.
• Be aware that you will not be allowed to take on additional credit after starting the process.
• Agree and commit to the selected financial solution.
• Adhere to the agreed monthly instalments.

#5 Protection From Creditors

Once you sign up for debt counselling, you are protected from legal action for 60 days from the day of application. However, this is on condition that you stick to the payment plan.  

Your creditors will not be able to contact you directly and will need to communicate with your appointed debt counsellor.

Once you sign up for debt counselling, it will be noted on the records of the various credit bureaux.

For debt counselling to work, you need to commit to the process and follow the advice provided by your debt specialist. If you have any concerns, you should discuss them with your qualified debt counsellor who will provide you with the best advice based on your financial situation.

#6 Debt Clearance Certificate

Once you have settled all your debt, your debt counsellor will provide you with a Clearance Certificate. Next, your debt counsellor will inform the various credit bureau companies that you have cleared all your debt. These bureaus will then remove all the information regarding your debt. This signals the end of your debt counselling journey and you have been given a clean slate and credit record.

A clearance certificate is provided in the following instances:

• All accounts that formed part of the debt review process have been settled.
• All credit accounts (or smaller debts) have been settled excluding a large account, such as a bond.
• A court has declared that you are no longer over-indebted.

Are you ready to start the journey to financial freedom?

Talk to one of Cyber Finance’s dedicated financial specialists by applying for a obligation-free debt assessment.

Cyber Finance helps over-indebted South Africans become debt-free.