Recent statistics released by Veri Cred Credit Bureau show the staggering scale of the debt crisis faced by South African consumers. The data puts the current debt – which represents all the debt still outstanding – at the end of June at a whopping R2.077 trillion. The statistics also indicate that at the end of June, 717 495 people were under debt review.
Sebastien Alexanderson, chief executive of debt counselling firm National Debt Advisors, says that although debt review has received its share of negativity over the last few years, “more consumers are becoming aware of its benefits, as evidenced by an increase in the number of consumers seeking debt counselling”.
Debt counselling was introduced in 2007, through the National Credit Act, as a debt relief measure to help over-indebted South Africans. A major benefit of debt counselling and the process of debt review is having a registered debt counsellor negotiate with creditors on your behalf for reduced payments (in line with your disposable income), as well as putting forth restructured payment plans – which are referred to court for final determination. You are then protected from any legal action by credit providers on debt where legal action has not already commenced.
Alexanderson says there are a number of points that need to be considered before undergoing debt review, but insists that commitment to the process is key. “We have seen many consumers buckle down and make the required sacrifices and lifestyle changes to get themselves back on track again. They are fully aware that while under debt review, they will not have access to new credit, as the goal is to first clean their slate of existing debt and then re-evaluate their financial situation and appetite for new debt. Their access to credit will only change once they have settled all their short term debt and their payments on their mortgage agreements are up to date. Only when all of these conditions have been satisfied, can their debt counsellor issue them with a clearance certificate and notify all creditors and credit bureaus of their new credit status.”
He says you should ensure that you fully understand the terms and conditions of your debt counselling agreement, and be aware of the costs involved.
Alexanderson says that many people enter the debt review programme seeking immediate relief from debt collectors and creditors, only to exit the programme before their debt is successfully repaid.
“Many people talk the talk of getting out of debt – but are not willing to walk the walk – at least not all the way to the end. This is incredibly short-sighted and even dangerous, as it opens you up to legal action from creditors and possibly even the repossession of assets via the courts.
“Anything that adds to our well-being is hard work. There is no magic wand. When we set a goal for losing weight, we have to follow the steps and make the sacrifices. The same applies to becoming debt-free and ultimately financially free. It isn’t easy. Yet, it is achievable – and worth it," Alexanderson says.