Borrowing money from financial organisations is normal for most people. Whether it is to make ends meet during a tough financial period, or it is for a long-standing financial goal, most people will borrow money in their lifetime. If all goes well, one pays off their loan in the agreed time period with the lender and life goes on. But sometimes things do not go as planned and debt begins to get out of control. Debt Counselling is one of the possible options that one can take to walk the journey of paying off debt.
"Debt Counselling is a formal legal process that provides for a consumer to be declared over indebted and for the Debt Counsellor to negotiate a restructured payment plan and obtain a court order confirming the new repayment plan. The Debt Counsellor must be registered with the National Credit Regulator and have an NCRDC number" - National Credit Act.
What this simply means is that if you are over-indebted, a Debt Counsellor can negotiate with your credit providers on your behalf to get lower interest rates and reduced monthly instalments. This makes your debt more manageable. However, like any other decisions in life, before making it you have to weigh the pros and cons. Below is useful information you can note when deciding on debt counselling as provided by The Standard Bank Group.
Debt counselling pros
- When you are in debt counselling, creditors cannot take action against you
- There is no permanent record of having undergone debt counselling
- There is only one monthly repayment to be made
- Your budget will meet your basic needs first before provision is made for debts
- You will never pay more money than you can reasonably afford
- A debt counsellor will suggest ways of cutting costs and saving money
- You will no longer get calls from your creditors demanding payment
Debt counselling cons
- You are not allowed to have more credit while undergoing debt counselling
- It does cost a little bit of money, but the fees are set by law
- Your debts might take longer to pay off as a result of paying smaller amounts each month
It's important to get a credit report to find out what your credit score is. This can help you decide whether you need guidance from a debt counsellor or whether you will work on improving your score by yourself. It has become easy to access your credit report nowadays for free. Some of the providers you can contact for this include Credit Bureau, TransUnion, ClearScore
Sources
Debt Counselling, National Credit Act, Click here.
Pros and Cons of Debt Counselling, Standard Bank, Click here.