Articles

Debt consolidation vs Debt review

There is a huge need for basic financial literacy in South Africa. Very often consumers choose an incorrect financial solution, simply because they don’t understand the terminology they are presented with. There is still huge confusion surrounding “debt consolidation” and “debt review”.

Unpacking both options

Debt consolidation

When people struggle, they tend to stress and scramble. The first thing that comes to mind is to get one loan that covers all their debt in one monthly repayment. Yet, the question must be asked — how beneficial is a consolidation loan to someone who is already over-indebted?

Points to note on a consolidation loan:

  • There is very little trade-off as you are simply paying your old debt with new debt.
  • High interest rates mean that consolidation loans are seldomly cheaper.
  • Initiation fees are generally applicable to these loans.
  • If you are in arrears with your accounts, it will reflect negatively on your credit record and chances are you will not qualify for a consolidation loan. You need a clean credit record to apply for a consolidation loan.

Debt review

  • It is a process implemented through the National Credit Act (NCA) and is regulated by the National Credit Regulator (NCR).
  • You can consolidate all your monthly debt repayments into one monthly installment under the process of debt review.
  • A debt counsellor can negotiate with your creditors to reduce the interest rates and lengthen the repayment terms on your accounts.
  • When you are under debt review, debt collectors may no longer harass you and your assets are safe from repossession.
  • A credible, registered debt counsellor can do your entire process debt review process online and via the telephone. There is no need to go into a physical office.

Debt review is not a scam. It has legitimately helped hundreds of thousands of South Africans break free from the burden of debt.

To understand the above better, read the story of Mr. Mapobe from the Eastern Cape:

“Before I started with debt review I really struggle to provide for my family. Buying things was also difficult. After completing the debt review programme, I know better now. My eyes are open”

Feeling the pinch of over indebtedness, Mr. Mabope signed up for debt review. He could not afford his existing debt, nor access new credit to help keep him afloat. He and his family were struggling to make ends meet. With children and a home to support, Mr Mapobe needed a way to secure his family’s financial future.

“I have money left in my pocket now, something that hasn’t happened in a long time.”

At first his family were sceptical about the debt review process. They thought it was simply another loan. Luckily, he had the entire process explained to him by a registered debt counsellor, and relayed it to his family

“My debts got paid every month. I got a statement and showed it to my wife [so she could see progress]."

With every issue or concern, Mr. Mabope would call in or visit his registered debt counsellor where they would sit with him and find a solution to whatever problem he was experiencing. Upon completing debt review process, he received a clearance certificate from his debt counsellor — and felt far more confident about his future.

“I learnt so much from being under debt review. This process healed the wound of debt that has affected me for so long. My debt counsellor kept their promises and did exactly what they said they would do. They put my soul at ease. My future looks better and brighter now.”

National Debt Advisors
DebtBusters
Pioneer Debt Solutions
National Debt Counsellors