16 Apr Debt Counselling: A Lifeline for Overdue Accounts
Debt review is a lifeline for overdue accounts. From credit cards and store cards to large instalment credit like consolidation loans and home loans, debt review always steps in to save the day when all seems lost. Whether you’ve received an S129 or simply can’t sleep at night because of repayment worries, debt review is a tried-and-true way to create room in your budget, lower your repayments, cut down how much you pay in interest, extend your repayment periods, and postpone repayment dates.
What is debt review? Debt review is a legal process wherein a debt counsellor negotiates with your creditors for lower interest rates, less in debt repayments, more time to pay your debts, and postponed repayment dates. After you submit your debt review application form (Form 16), your debt counsellor will assess your finances. When they have a clear picture of your finances, they’ll draw up a proposal to send to your creditors, listing how they think you might best be relieved of over-indebtedness.
The best part? Your creditors have to agree. Under the National Credit Act, your creditors must act in good faith to relieve you of over-indebtedness and “comply with all reasonable efforts”. The National Credit Act specifically lists the efforts your debt counsellor can take, which include reducing interest rates, lowering your balance, extending repayment periods, and postponing repayment due dates.
What Accounts Can You Place Under Debt Review?
You can place credit cards, overdrafts, clothing accounts, personal loans, vehicle finance, bonds, consolidation loans, and your mortgage under debt review.
Credit Cards
Credit cards are a type of revolving credit infamous for their high interest rates. The average credit card balance for a South African with a median credit score falls around 20 to 21%. That means you have to pay a fifth of your balance in interest. Debt review is fantastic for reducing this interest rate or your overall balance.
Overdraft
An overdraft functions like a short-term loan. When you draw more money than you have in your account, it falls into a deficit, which you must pay back in instalments. In a way, overdrafts also function like instalment credit – like a personal loan – and make for higher interest rates. Use debt review to relieve you of the stress of overdraft.
Clothing Accounts
Clothing accounts and store cards are notorious for high interest rates. For instance, the clothing and home store Mr. Price charges interest daily, which compounds at a sky-high rate monthly.
Vehicle Finance
As vehicle finance or auto loans are, in essence, personal loans, they have interest rates as high as personal loans. The maximum interest rate that creditors can charge by law is 24.5%. That’s a quarter of your finance in interest.
Consolidation Loans and Personal Loans
Consolidation loans are marketed as a “pay all your debts off at once” solution to debt, with low interest rates. Marketers usually don’t disclose that interest rates vary by credit scores, payment history, and more, which all affect what you pay in interest. Consolidation loans are also personal loans, so they can have interest rates set at the national maximum (29.25%).
Mortgages
Usually, our mortgages cost the most in repayments. Luckily, they can be consolidated under debt review, allowing you to become debt-free once you’ve completed your repayment plan.
What Debt Can’t Be Placed Under Debt Review?
You can’t place municipality bills, school fees, or anything else where you haven’t specifically signed a credit agreement under debt review. This is because the National Credit Act only provides for revolving and instalment credit.
Let Liminal Debt Solutions Assist
Our debt experts and debt counsellors will negotiate with your creditors for lower interest rates, less in debt repayments, more time to pay your debts, and postponed repayment dates, allowing you to focus on what matters most.
Leave a life of stress and worry behind. Contact Liminal Debt Solutions.