The most common misconceptions about debt review and debt counselling debunked!

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Originally Posted On: https://creditsalvage.co.za/all-blogs/86-misconceptions-about-debt-review

Misconceptions about debt counselling and debt review are running rampant. We will strive to set the record straight by addressing these myths about this essential debt management process. Many foreigners believe that South Africa is a vast desert surrounded by wildlife and those wild animals roam the streets. But this is far from reality. Popular misconceptions are easy to believe, but they stem from a weak structure of inaccurate information. There are many false beliefs associated with debt review and debt counselling. Due to these false myths, this process is often avoided by overindebted consumers like it was the plague.

They have heard from a friend that his brother’s Neighbour applied for debt counselling, and the process destroyed his credit report. As a result of their debt review application, they found themselves in a worse position than they were before. Believing inaccurate information will prevent over-indebted consumers from taking advantage of the process. You are more likely to improve your situation when you seek this financial relief measure from a reputable organization like ours.

The only people who require debt counselling are those with severe debt problems.

The misconception that this debt management process is only for consumers with substantial financial problems is incorrect. The debt relief process is available to you irrespective of the size of your outstanding debt, so whether you are over-indebted R50 000 or R900 000, you have the right to benefit from it. There is no doubt that debt counselling is an established, regulated, and successful process that has helped hundreds of thousands of people pay off their accounts regardless of their income and outstanding balance amounts.

• FAQ – Why should I consider this process to pay off my debt?

The National Credit Act created Debt Counselling to assist over-indebted consumers to repay their accounts by extending their original credit agreements and reducing their monthly payments. It helps overindebted consumers avoid legal action and afford their living expenses. You can get immediate financial relief through this process if you are overindebted or cannot afford to pay for living expenses. Don’t delay and contact us today.

You must pay a substantial upfront fee for debt review. 

There is no truth to this misconception. According to NCR regulations (NCR), fees are standard and regulated for all debt counsellor companies. You do not have to pay anything upfront if you want immediate financial relief! Fees are collected during the first two months of the process and are part of your monthly payments to your creditors.

Before the repayment process officially begins, you will receive details about all fees in your repayment plan. The process and its costs are governed by law and enforced by the NCR. The process is enforceable after a Magistrate grants a restructuring court order.

There is no benefit to Debt Counselling or Debt Review.

Taking advantage of this financial relief process will give you the best chance of securing a better financial future. This life changing process can only benefit you and your family if you approach it with the right mindset.

If you have a negative view and attitude towards the process, chances are that you will not be able to leverage all its benefits.

There may be a chance for you to get out of financial difficulties if you are open to change and willing to put in the work to improve your finances.

There are many ways in which a debt counsellor can help you through this process, such as:

• A proven debt management system aimed at reducing and paying off accounts through Proper Financial Management
• Flexible Repayment terms
• Affordable
• Budget management
• Reduction in interest rates
• You avoid legal proceedings, expensive legal fees, and collection calls from attorneys and collectors.
• Ensures the protection of assets
• Within 30 days of completion, your credit record will be clean and unblemished with improved credit scores.

In most cases, it is not until a person has gone through debt counselling and paid off substantial amounts of debt that they understand the positive impacts that this life changing process can have on their lives.

For more on the benefits of debt assistance, please visit the following article – debt counselling rewarding benefits of debt counselling

• FAQ – Is debt review a good Idea?

  Yes! Full participation in this kind of debt relief process could be a greatly beneficial experience for you in the long run. This process could help you manage your financial problems. Furthermore, you will be able to understand your financial situation better, learn to budget, and become more conscious of your spending habits.

In addition, getting help through this process will keep you from accumulating more debt. There is nothing shameful about being in debt. Taking control of your finances and regaining peace of mind can be achieved by knowing the financial relief options available. Contact us today and let us take care of your financial worries.

When you are under Debt Counselling, you are blacklisted.

The misconception consumers have about debt counselling is that they will be blacklisted when seeking assistance with their debt burdens. It is only possible to be blacklisted if you have a poor credit record and are not paying your accounts on time.

This misconception is not accurate. The right to debt counselling exists for overindebted consumers, regardless of whether they are blacklisted.

According to the NCA, a credit bureau must flag your profile as being under debt review the moment you apply for financial relief. You will not be blacklisted, but you will not be able to request any new credit facilities while you work on paying off your debt and becoming financially independent.

Credit providers use this information to determine if a consumer who has applied for new credit is currently undergoing a debt review. If they spot the flag, they will decline your application and not because you are blacklisted. This debt relief process is a rehabilitation process that assists consumers in becoming debt-free but getting approved for new credit facilities while getting help will not assist them get rid of their debt.

There is a light at the end of the tunnel when you have paid off your accounts. As a result of completing the financial management process and obtaining debt-free status, a clearance certificate or a form19 will be provided to all credit bureaus instructing them to update your credit report. Once this bureau process is complete, you can apply for credit as usual without any record of your involvement with debt review.

Being in the debt management business for over 16yrs, we know it can seem overwhelming when looking into or applying for this debt relief process. As we have seen, many consumers recognize that seeking help is the responsible and wise course of action, particularly when faced with financial difficulties.

Contact us as soon as possible if you are drowning and unable to meet the minimum instalments due on your credit agreements.

• FAQ – When you are blacklisted, what does that mean?

You may fall under the category of a blacklisted consumer if you have a history of not repaying your debts, having judgments on your credit report, or defaulting on your loans. In the future, you may have difficulty obtaining new credit facilities with adverse items listed on your credit report.

Debt Counselling is expensive.

Debt counselling is not expensive as is commonly believed. The process is highly regulated, and the fees are the same for all debt counsellors. Recurring aftercare fees are set to a maximum of 5% of your monthly instalment to the maximum R450pm and will never exceed this amount per month.

By way of example, if your restructured amount per month to all creditors is R4000. For the aftercare fee, a maximum of 5% will be charged, in this case, equivalent to R200 per month. R3800 will go toward your creditors, and R200 will go towards the aftercare fees. As a result of the reduced interest rates, the reduction in monthly interest will indirectly cover the cost of your aftercare!

Using the example above, you will pay a one-time restructuring fee of R4000. No More!

It is important to note that you will never be charged more than your restructured monthly payment up to a maximum of R8000 and five per cent aftercare fees up to a maximum of R450. The maximum set out by regulations applies regardless of if you have a restructured amount of R30 000pm and hundreds of accounts to be restructured.

You can read more about the fees and structure in our blog article about regulated debt review fees. In addition, you can reach us on 0878980895 or use our live web chat function found at the bottom right of this page.

• Is debt counselling free?

Although debt counselling services do not come for free, the process offers a cost-effective way for consumers to pay off substantial amounts of debt.According to the National Credit Regulator, consumers should be informed up-front by the debt counsellor what the fees will be.

There is no hope for your situation.

Another untrue misconception. If you have severe debt, there are options to repair your over-indebted situation. This regulated financial relief process, which is a method of paying your accounts through monthly payments to a PDA, is a helpful solution. The Payment Distribution Agent will distribute the funds to your creditors under a restructuring court order.

Reducing interest rates, fees, and legal collection calls are all benefits of this immediate financial relief process. Your debt counsellor will assist you in re-establishing your credit scores and reputation once you have completed the process.

It takes a minimum of five years to complete a debt review program.

It depends on you, your outstanding balances, and your available disposable income to determine how long it will take you to complete this process. There is a damaging misconception that the process takes a consumer a minimum of five years to complete, causing consumers to avoid using it. It is undeniably untrue, hindering plenty of consumers from taking advantage of the numerous benefits it can bring them.

Our priority is to offer immediate financial relief while keeping your creditors happy. In the coming year, we will discuss and propose increased payments in our annual review to reduce your repayment term. The repayment plans vary from 6 – 60 months, and in terms of the repayment model, the process is very flexible if the creditor receives the required monthly instalments.

As your financial situation improves over the years, we will offer you a proposal to increase your monthly contribution so that you can complete the process sooner rather than later.

• FAQ – Can you tell me how long it will take for me to be debt-free?

It is difficult to set a specific period up front for each individual because each case is unique. Your monthly net income, living expenses, and total outstanding debt are considered before we draft a repayment proposal for your creditors. Based on the above, we prepare a budget, calculate your monthly instalment, and discuss this with you in detail. The repayment term depends on the amount you are comfortable paying versus the amount you owe.

• FAQ – Will I still be under debt review if I have paid off all my accounts but my bond?

A clearance certificate will be issued immediately after your debt counsellor confirms that all your unsecured accounts have been paid in full and your home loan account is up to date. Credit providers and credit bureaus will remove the flag from your profile once they receive the clearance certificate, and you will qualify for new credit.

The debt Review process takes too long and does not work.

The Debt Review system is tested, proven, and works exceptionally well, but it requires the commitment of the consumer for it to work efficiently.

The process does not require extensive consumer involvement, except to pay the monthly restructured instalment and carefully review monthly statements from the PDA. If you ensure that payment is received every month, you will soon notice that the process functions effectively, as the balances decrease every month.

Debt counselling will affect employment applications.

There is a perception that seeking debt counselling or going through it will negatively affect your current position, future job searches and the likelihood of obtaining future employment.

• Current Employment: This debt relief process is a strictly confidential process between the creditor, debt counsellor and the client. Debt counsellors will at no point under any circumstances notify their clients’ employers of the restructuring application and over indebtedness status. There is a high probability that your current employer will not know about your financial relief application unless the employment agreement requires an annual credit check. If you are having financial difficulties, we recommend being honest with your employer. Your employer will certainly support you through this journey.
• New Employment opportunities: Employers will run a credit check to see if you can manage your finances when applying for a new job opportunity in the financial sector. When you would be advising the public on money management and financial products. Many employers will believe that if you cannot manage your own money properly, you cannot give sound financial guidance to other individuals.

By signing up for the process, you are taking a responsible step towards repaying all your accounts and showing your prospective employer that you are accountable for and are aware of the risks of unpaid debts. It also shows your potential employer that you have taken the necessary steps to manage your finances.

The credit bureau indicator should not affect your chances of getting hired. For clients applying for new jobs, we can provide them with a motivational letter explaining the process and their willingness to be financially responsible.

• FAQ – Can Debt Review Affect Employment?

  No! The process is confidential, and your employer will not receive any information regarding your financial status or debt relief application. Therefore, your debt review application will not affect your current employment prospects!

When it comes to new employment opportunities, you should not be worried if your credit report is checked and an employer finds out you are under debt review, as this should not prevent you from being hired. However, we can provide you with a letter outlining the reasons and process for the application to demonstrate your financial responsibility.

Debt counsellors will not pay my accounts. 

According to the National Credit Act, debt counsellors cannot accept any payment from their clients. All transactions you make will go to an NCR-regulated Payment Distribution Agent (PDA). A PDA manages all your funds and distributes them according to a court order or creditor acceptance. You can easily query anything you disagree with in your monthly statement. If you are still unhappy with the result after submitting your query, you may approach the NCR for an investigation. There is no need to worry about your monthly contribution, as your creditors will always receive their instalments as agreed!

If I apply for the debt review process, I will never be able to borrow money again!

This misconception is also untrue. This regulated debt relief process will assist you in getting debt-free, and once you have completed this procedure, you will be eligible to apply for finance for a home and a car or any other type of credit agreement. When a clearance certificate or form 19 is issued, there will be no indication that you ever used a debt relief process and will qualify for new facilities 30 days after the update.

Benefits of debt review? 

Consumers who are struggling with debt can benefit from the services of debt counsellors. Creating a budget, negotiating with creditors, and creating a payment plan can all be done with the help of a good debt counsellor.

A debt counsellor can also provide you with information and education on various financial topics, for example, money management and credit report clearance. If you are experiencing financial problems, debt counselling can prove to be a valuable resource for you.

Getting help with debt can prove to be immensely beneficial in several ways.

1. Obtain immediate financial relief
2. By negotiating lower interest rates, it could be possible for you to save a significant amount of money.
3. It can help you pay off your accounts more quickly.
4. As a result of debt counselling, you can gain the peace of mind that comes with the knowledge that you are taking steps to improve your financial position in a more structured way.

Consider contacting us today if you are struggling with your finances.

Conclusion – misconceptions about debt review

Ultimately, it comes down to your mind regarding how you want to approach the idea of Debt Counselling and how you intend to approach it. As a result of dispelling these misconceptions about debt review, you will be able to clear up some of the most common myths surrounding the debt counselling process that are not true.

Because the financial markets are becoming increasingly unstable and vulnerable, it is imperative for you to always ensure your financial stability. Utilizing a debt counselling service can be a beneficial solution when you experience financial hardship.