Going into debt rescue is a huge life change that often restricts a consumer’s financial options for a long time. This means it’s vital to take all possible money saving steps, before making that all important decision...
Debt rescue is a crucial financial safety net for all South African consumers - even those who never use it. The mechanism was created by the National Credit Regulator, via the stipulations of the National Credit Act, to allow consumers who can no longer manage their monthly loan re-payments to restructure their financial lives, with the help of a specialist service provider.
‘It’s a very useful financial tool,’ says Tlalane Ntuli, co-founder and Chief Operating Officer at Credit Life Insurance brand, Yalu. ‘Everyone loses when someone can’t pay their debts and just walks away. The consumer ends up blacklisted, while the credit provider won’t get their money back. It’s in both parties’ interests to work together to develop an alternative plan, and debt rescue allows this to happen.’
Once a consumer enters debt rescue, they no longer qualify for any kind of credit, and this status lasts until all their debts have been fully settled. In addition, the debt rescue counsellor takes over all interactions with financial service providers on their behalf. This allows the counsellor to negotiate with many providers with respect to the time periods and interest rates applied to different loans. While the consumer is largely powerless through the process, they enjoy the significant benefit of being presented with a single monthly re-payment structure that will eventually get them out of debt.
‘When you are in serious financial trouble debt rescue is the sensible way out,’ explains Ntuli. ‘However, being unable to represent yourself financially means you can’t take out a loan to buy a car or a house, or even to pay for university with a student loan. If the debt rescue period is long, as it often is, this can have a massive impact on someone’s life, and that of their family. Once you’ve started the process there is no going back, so debt rescue really should be the last resort – something you do when you’ve exhausted all other options, including carefully re-examining the structure of your financial life.’