The 10 Biggest misconceptions about debt counselling

It is our passion as a debt counselling company to give you as much information about what we do as possible. Transparency is vital when it comes to trusting in us as your debt counsellor. In this article we will be discussing the 10 Biggest Misconceptions about Debt Counselling we experience.

We all want to imagine a world without any financial stress. A World where money plays very little part of our everyday lives. Hey, we are allowed to dream aren’t we?


The bottom line is that we need to deal with our personal finances on a daily basis and unfortunately it does not always work out the way we plan.

This however is not the end of the world and there are good, positive solution for those times that our debt has just gotten the better of us. Debt counselling is that solution, unfortunately a few misconceptions about debt counselling has made people think twice about the debt counselling process and the benefits it has for all South African consumers.

1.      Debt counselling is the same as Debt Review.

Probably the biggest misconception about debt counselling is that it is in fact the same as debt review. This is partially the result of debt counselling companies using the term as a way of explaining the debt review process and the fact that debt review is the most popular debt counselling solution in South Africa.

Debt counselling is not debt review! But rather the overall process of restructuring your debt situation and providing you with a solution through one of the available services. Debt counselling can be better explained, as the process of finding the best solution to your financial situation. These solutions or services like debt review, loan consolidation, sequestration and Voluntary debt restructuring all fall under the term debt counselling.

It is up to you and your debt counsellor to decide which one of these are best suited for your individual situation.

2. You are blacklisted once you are under Debt Counselling.

You can only be blacklisted if you have a bad credit record and are not meeting your debt obligations.

The misconception about debt counselling comes in with Debt Review. If in your case, debt review is the best option. Many people are under the misconception that you are blacklisted under the debt review process. This is not at all true…You will most likely qualify for debt counselling if you are blacklisted or over indebted. A Low credit score can also have an effect on your credibility, things like late payments and judgements against your name are all signs of you being over-indebted and not being able to afford your credit.

How Debt review works:

The main reason for the debt review program is to help you reduce your debt and become credit clear. If you consider this, it only makes sense that you do not make any new debt while you are trying to pay-off the debt you currently have.

That is why a notice is placed on your credit record, which simply restricts you from applying for new credit. As soon as you are no longer over-indebted your debt counsellor issues you with a clearance certificate that goes to the credit bureau and the notice will be removed.

You will then be able to apply for new debt and no credit provider will even be able to see that you were under debt review.

If you want some of the benefits of Debt review but also want access to certain credit facilities then you can consider Voluntary Debt Restructuring (VDR).

Find out more about the Pros & Cons of Voluntary Debt Restructuring (VDR).

3. You can’t consider debt counselling once you have judgements or are blacklisted.

Every individual situation is different and the misconception about debt counselling is that once you have judgements or are blacklisted you can’t consider debt counselling. This is simply not true. As mentioned in the previous point, this is almost certainly a reason for you to want debt counselling.

Many times it is the credit providers themselves that cause this misconception because they don’t want you to go under any form of debt counselling, as you are then protected in many ways against them.

You have the right to approach a Debt counsellor at any point you feel that you need assistance with your debt. We do recommend you do this before it gets to a point where you have judgements and arrears, but we are still able to assist you in regaining a strong credit score.

If you feel you are not able to meet your credit agreements and are over-indebted contact us as soon as possible, in order for us to give you the best possible result.

4. Debt Review / Debt Counselling  takes 5 years.

This misconception around debt counselling taking 5 years comes from the fact that the with Debt review the process of clearing your debt can take up to 60 months or 5 years. You must also know that in most cases this is not true. You can complete your debt review process as quickly as possible. As soon as you are debt free, you are done with the process.

Every situation changes over time. There are ways of speeding up the process. Perhaps you get an increase or promotion from work, you are then able to pay more every month towards your debt. This can allow you to increase your monthly payment in order to clear your debt faster.

5.      You have to appear in court when applying for debt counselling.

No matter which debt counselling process you are applying for, whether it’s Debt Review, Consolidation loan, VDR or Sequestration. You will never need to appear in court for any reason. Your debt counsellor will do all the application and legal needs on your behalf.

This is why under debt review your first payment will go towards your debt counsellor for their work in assisting you with your process and your second payment will go towards the legal fees of your application.

Make sure that you understand all the benefits of debt counselling and do your own research if you are not 100%. Unfortunately there are people out there that just wants to exploit your situation further. Watch out for the scams!

Click here to read more on how to make sure you are not being scammed by a debt counsellor.

6.      Nothing can be gained from Debt Counselling.

Debt counselling gives you the best possible opportunity of improving your financial situation. The misconception about debt counselling only having a negative impact is all up to you.

If you have a negative mind set around how debt counselling will be beneficial to you. You will not gain anything from it. But, if you are open to change and are willing to work to improve your situation. Debt counselling has the potential to help you;

–         Regain financial stability,

–         Manage your budget,

–         Help you save money,

–         Protect your assets, &

–         Restore your credit record.

Many people do not fully understand the positive impact that debt counselling can have on your life until they are under debt counselling.

7.      Declaring bankruptcy is simpler.

The negative consequences of declaring bankruptcy on your credit score and the financial impact are massive and outweigh any impact that debt counselling may have on your financial situation.

The misconception that bankruptcy is a better option has no real ground to stand on. Bankruptcy has a long term effect on your credit record. Yes, debt counselling has an impact on your financial situation but a short impact. As soon as you are no longer over-indebted and are able to manage your debts again, there will be no record of you ever going under debt review. Bankruptcy on the other hand will always be a footnote in your financial history.

The cost and legal implications on declaring bankruptcy is something to consider as well.  When you are applying for debt counselling, all fees are calculated and provisions made for that. With Bankruptcy you do not have the same privilege.

In very rare cases, bankruptcy can be an option but only if all other alternatives has been considered. It is then between you and your debt counsellor to asses and make a decision that is in your best interest.

8.      Debt Counselling only offers you Advice not solutions.

A debt counsellor has an obligation toward you to give you all the available options and give you as much information as possible in order for you to make an informed decision.

After your debt counsellor has done a full credit assessment, He or She will then give you advice on solutions available. You need to be willing to take action and work towards a better financial life. Your debt counsellor cannot do this for you. We as your debt counsellor is here to guide you and make life easier where we can, but without your commitment to improving your own situation we cannot do much.

Debt Counselling is a solutions driven service. We enable you to take the right actions. It still remains the best form of financial rehabilitation in South Africa and that is because of the positive impact solutions like Debt review and Voluntary Debt Restructuring has on the people that make use of these solutions.

9.      You end up paying more for Debt counselling fees than for your own debt.

According to the National Credit Regulator (NCR), every debt counsellor can only charge you a certain amount for debt counselling fees, legal fees and admin fees. You will never pay more than your restructured monthly payment or up to a Maximum of R8000 (R9000 if married in community of property), whichever is the lower amount. The aftercare fees are set to 5% of your distributable amount or a maximum of R450, whichever is the lower amount.

If you want more information about the fees and the structure, feel free to request a free call back one of our debt counselling experts will give you a call to answer any questions you might have. You can also find this information available on the NCR website.

Important note:

It is important to know that your new monthly payment is less than what you used to pay towards your debt. This payment gets distributed according to the total amounts due on your accounts. What this basically means is the bigger balances get the higher instalments. A Home loan for instance will receive a bigger portion of the payment that a clothing account. This allows for your creditors to also get their fair share of what you are able to afford to pay towards your debt. This also means that some accounts could take longer to pay off, but you will ultimately have the benefit of not needing to stress about your accounts. As long as you are committed to clearing your debt and make your payment every month

10.      Debt Counselling will affect you when applying for work or rent.

There is a big misconception that debt counselling will affect you when you apply for work. Rest assured your new employer or potential employer will not be able to find out that you are under any debt counselling program. We do recommend being open with your employer about financial matters if it will affect your day to day work performance. Honesty is the best way forward with any new opportunity.

The same goes for rental. As long as you qualify according to the rental agent’s agreement and are able to afford the monthly rent, debt counselling will not affect your application to rent at all. You can also ask your Debt Counsellor to provide you with a Certificate of Affordability that you can add to your rental agreement.

The only place debt counselling becomes apparent is when you are applying for credit. In the case of Debt Review you will not be able to even apply for new credit and many other debt counselling services, like sequestration and consolidation loans will have an effect on your credit score.


At the end of the day, it comes down to your own mind-set and how you want to look at Debt Counselling. These misconceptions about debt counselling just help you clear some of the most common associations around debt counselling that are not true.

Debt is the most expensive thing to have. With an ever increasing vulnerability and unstable financial markets it is vital to ensure your financial well-being. Debt counselling can definitely give you a positive solution if you have fallen into some bad times with your debt. You are not alone in your problem and we can offer you a solution that will benefit you to the best.

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