Ever since the economic crisis of 2008 there has been a rush to enter into the debt review and debt counselling industry. This is especially evident in South Africa. While many in the industry no doubt have good intentions and want to help over indebted consumers, not all industry players are so altruistic. For every professional, competent service provider there are a bunch of cowboys and fly by night type operators looking to make a quick buck. The best defense in this scenario is to be well informed about this industry so that you can make a good choice when selecting a partner to assist you.
What Is Debt Review?
The National Credit Act (or NCA) was set up to aid people who had taken on too much debt and were unable to keep up with all of their payments. If they found themselves in this position then they could submit themselves to the debt counselling process. The debt counsellor that proveds the service has to be registered with the National Credit Regulator. The process involves collating a summary of the person’s debts and then calculating how much the person’s finances realistically allow him to pay each month. The debt counsellor will then approach the person’s creditors to negotiate a reduced payment plan.
The debt review process helps both the consumer as well as his creditors. The consumer is assisted with financial advice as to how to honor his debts. The creditors are assisted in obtaining payment from a customer that may otherwise have given up making any payments at all.
Pro’s and Cons’ of Debt Counselling
There are pro’s and con’s to this process though. While the above resolution process sounds good there are some caveats. While under debt review the consumer will not be able to access any credit. This makes sense though seeing as they are already in a position where they can’t service their existing debt. Debt counselling is really there as a protection against future indebtedness in addition to remedying an existing situation.
A person who finds themselves in debt that they are unable to repay would do well to subject themselves to debt review. Before doing so it is important to understand the process fully. It is also important to approach a professional company that actually has your interests at heart. Once the process runs it’s course the consumer should be debt free and hopefully more careful about requesting credit.