Tips to navigate debt counselling hassle free
The first 100 days are most important
As rising interest rates and inflation further pull on the country’s collective purse strings, more South Africans are considering debt counselling as a way to regain their financial footing. If making the decision to apply for debt counselling is an important first step, the first 100 days are critical.
While a reputable debt counsellor can take away a lot of the anxiety of dealing with creditors and will support you through the process, it’s important to remember that the credit record and debt repayments are still yours.
Most consumers who successfully complete debt counselling agree that successfully navigating the first three months or so establishes the pattern for the rest of the process. We’ve found the more engaged people are, the better they are able to make a clean break from past habits and ensure a positive outcome.
Here are 11 tips for successfully navigating the first 100 days and laying a sound foundation for the rest of the process:
1. Your debt counsellor will work with you to draw up a new budget. Adapt it according to your new spending patterns.
2. Open a new transactional bank account, so that you can start a new banking relationship without the legacy of existing debit orders.
3. Cancel or suspend existing debit orders or Debicheck payments that are paid directly to your creditors. Replace these with a single Debicheck payment, payable to the Payment Distribution Agency that has been nominated by your debt counsellor – this single payment will take care of all your creditor payments.
4. Confirm that your credit providers cancelled existing debit orders and Debicheck mandates.
5. If you get phone calls from credit providers, refer these to your debt counsellor.
6. Sign up to an online, free credit-monitoring profile to keep track of your credit score and payments.
7. Open a tax-free savings account and put money aside for savings and emergencies. Commit to saving a minimum of 1% of your take-home salary monthly.
8. Make sure you are appropriately insured, but check that you are not over-insured. Consider insurance policies that pay cash back or allow you to earn dividends or payouts.
9. Tell at least one close friend about steps you have taken to improve your financial situation. Their support will be important.
10. Keep up to date with how you are progressing. For example, when your debts have been restructured, check your creditor statements to see how much you are saving. Know how much you pay in fees and linked credit insurances.
11. Refrain from using more credit. Cut up your credit cards. You aren’t able to apply for credit while under debt counselling, but don’t be tempted to borrow money from family, friends or unauthorised lenders.
It is also important that you provide the necessary documents to your debt counsellor to ensure the process is smooth.
Above all, ask your debt counsellor about anything you don’t understand. It is their role to help and guide you to through the process until you successfully complete debt counselling.