When trying to figure out whether anything is good for you, a good idea is always to make a pros and cons list. In this blog post we'll unpack the debt review pros and cons, what it means to be under debt review and any debt review consequences there might be in the process.
What does it mean to be under debt review?
To be under debt review means you are following a repayment plan that a registered Debt Counsellor has put together for you. A South African consumer enters debt review because their financial situation is overwhelming and they just cannot cope with all their debt repayments. They may also be looking to repair their credit record.
The debt review process is a legal process that is regulated by the National Credit Regulator (NCR). When you are in the process, instead of paying multiple monthly repayments, you pay one reduced monthly payment for all your debt. Think of it as debt consolidation, but without having to take out a loan.
The truth about debt review
There are many fake debt counselling services out there that consumers should be wary of.
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There are also regulated debt review companies who have saved people from a lifetime of debt.
There are debt counsellors who, after they've promised to help, have run away with a client's money.
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There are also debt review companies that have saved their clients money by significantly reducing the interest rate on their loans.
The truth about debt review is that scams do exist. You just need to know how to avoid them.
Read: A young family went from over-indebted to debt-free thanks to Meerkat
This is how you can avoid the debt review scams:
- BEFORE agreeing to any debt review process, check that the Debt Counsellor is listed on the National Credit Regulator’s (NCR) website. Check if your Debt Counsellor is registered.
- Meerkat’s Founder & CEO, David O’ Brien, is a registered Debt Counsellor.
- Check who the Payment Distribution Agency (PDA) your Debt Counsellor works with. A PDA collects your funds and distributes this to your creditors. For this process to work smoothly, your Debt Counsellor should be partnered with a reputable PDA.
- Meerkat partners with Hyphen— SA’s leading PDA agency.
Important facts to know about debt review
- Because the debt review process is regulated, the fees involved in the process are regulated too.
- This means that there is a maximum amount that Debt Counsellors or debt counselling companies are allowed to charge a consumer.
- Paying up to R9500 in debt review fees is the maximum cost associated with debt review. At Meerkat, we aim to be a lot cheaper than the maximum amount associated with debt review fees.
- We genuinely believe in the power of saving to help set yourself up for financial freedom.
- The costs for debt review goes towards the administration, legal fees, communication and negotiation with all creditors.
- At Meerkat, we charge you a debt review fee for the first two months of your debt review journey. Thereafter, we will start paying your creditors.
- Please note that during this time you do NOT default on your payments with creditors. During negotiations with creditors, we inform creditors and they agree regarding when payment for your accounts will commence.
Disadvantages of debt review
When considering the disadvantages of debt counselling, these are the main factors that often come up:
- You cannot apply for credit while undergoing debt review.
The reality is that you cannot get out of debt by creating more debt. While always having access to credit can seem essential—especially if you’re always struggling to make it to the end of the month—not having access to credit is actually helping you in the long-run.
It's also important to remember that a new loan to finance debt is just a temporary solution—a very costly one at that. - Once you’ve approached a Debt Counsellor and filled in form 16 (application for debt review), if you are found to be over-indebted, you will NOT be able to voluntarily leave the process until you have paid up all your debts.
- Undergoing debt counselling is a serious decision and should definitely not be taken lightly. Before you apply for debt review, ensure you are fully informed by reading this blog post.
Watch this video with Founder & CEO of Meerkat, David O'Brien as he unpacks the debt review process:
Benefits of Debt review
- In debt review, Debt Counsellors will negotiate with your creditors to reduce your interest rate on your loans. This means you can save money because a reduced interest rate can mean you pay less for your total debt amount.
The Dlomo family saved R23 000 on their monthly debt repayments with Meerkat. Read about their story here. This is not too good to be true, this is a direct result of the power of reducing interest rates.
- Legal protection of your assets (home and car). This means that a creditor cannot take legal action against you and repossess these assets when you are undergoing debt review.
- The opportunity to enjoy life again without constantly worrying about how you will afford and pay for everything.
“Joining Meerkat was the best decision ever. From day 1 of my application, I didn’t have to engage with creditors on the phone.
I’ve had about a 77% reduction with my debt, I have 3 creditors fully paid, and now I own my car (feels great!)...” - Shaheema on TrustPilot
After successfully completing the debt review process at Meerkat you will receive a clearance certificate. This certificate indicates to the credit bureaus that the debt review flag can now be removed from your credit report and you are free to start applying for credit again. Remember, debt review is not a life sentence. It's an opportunity to rebuild your financial life again!