guide to debt counselling

If you have trouble repaying your debt, the best thing to do will be to turn to a debt counselling service. You will get all the assistance which you need to arrange the repayment of your debt and to manage your finances effectively. That way, you will gain financial stability once again.

Understanding Debt Counselling

The main job of debt counselling is to give you protection from creditors in case you are no longer able to repay your debt. However, it can only be used before your creditor starts sending summons and takes legal action against you.

While the average consumer has small bargaining power, a credit counsellor has the skills, experience and means to negotiate more affordable loan repayment terms on the person's behalf. With the help of debt counselling, you will get more easily payable monthly instalments. The counselling process is not short, but it should produce highly satisfactory results as it will demonstrate to your creditors that you are making effort to pay what you owe them.

Debt counsellors are licensed by the National Credit Regulator and are guaranteed to act in the best interest of their clients. When your case is under debt review, your creditor cannot take any legal action against you within a period of minimum 60 working days.

Qualifying for Debt Counselling

You must meet the following conditions in order to qualify:

- Earn an income
- Have permanent employment or be self-employed
- Have disposable income left at the end of the month after covering your living expenses - This income will be used for the repayment of your debt.

You should be prudent and resort to debt counselling while you still can. It is certainly not wise to rely on getting a salary increase or winning the lottery for the sake of repaying your debt which is piling up.

How to Use Debt Counselling

Step 1

You need to disclose all details on your monthly income, budget and bills to the debt counsellor. For this, you have to use the latest bank statements on your debt and pay slips. Make sure that you bring your ID.

Step 2

The credit counsellor will confirm that you are actually over-indebted. Then they will arrange a time and date for consultation. The consultation can take place in the counsellor's office or over the phone.

Step 3

As part of the consultation, the debt counsellor will confirm your budget and debt details. They will also offer a new budget with set amount for debt repayment. They will give you a detailed overview of all cots and present a debt repayment plan. If you are satisfied with the solution offered to you, you can formally apply for debt counselling.

Step 4

The debt counsellor will contact your creditors and the credit bureau to confirm the existence and size of your debt. The credit bureau will list you as a borrower under debt counselling. You will keep this status until you repay your debt in full. Then it will be removed. The counsellor will try to negotiate more lenient terms with all of your creditors.

Step 5

If all of your creditors agree to the offer made by the credit counsellor, a consent order will be issued by a Magistrates court. If one or more creditors reject the offer, the counsellor will submit proposal for a decision to the Magistrates court.

Step 6

The debt counsellor will prepare and present a final debt repayment plan to you and submit it to a Payment Distribution Agency (PDA). The job of the agency is to ensure that each creditor receives their share of the payments that you make every month until the entire debt amount is repaid in full.

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