Option to protect assets

If you’re struggling with your finances and have fallen behind on paying for a home or vehicle, debt counselling may be an option. It allows you not only to retain your assets, but also secure better payment terms on them.

It works like this:

A registered debt counsellor will do a financial assessment to determine how much you owe and whether debt counselling is a potential solution.

If it is, you formally apply for debt counselling. The debt counsellor will then inform all your creditors and credit bureaus that you have applied for, and are undergoing, debt counselling. Once they are informed, creditors deal with the debt counsellor rather than contacting you directly, which should help ease some of the pressure.

The debt counsellor then negotiates reduced monthly payments on all credit agreements that fall under the National Credit Act, including vehicles and home loans. This is done within agreed industry parameters and what you can afford. In most cases, interest rates for vehicles and home loans could be reduced to repo rate plus 2% through renegotiation with lenders.

Once the more affordable repayment rates are negotiated, the “rearranged debt” is approved by a court or the National Consumer Tribunal. This confirms that the creditors have agreed to the rates and cannot change them for the duration of the debt counselling.

You then make one affordable payment each month, which is distributed to the creditors via an independent payment distribution agency, also regulated by the National Credit Regulator.

Debt counselling usually lasts for between three to five years, depending on the amount of debt, the rates the debt counsellor can negotiate and what you can afford to pay.

On completion the debt counsellor issues a clearance certificate confirming that all the accounts listed in the agreement are paid up. Home loans are the exception. These do not need to be fully paid up but must be up to date.