Anything that involves money should be taken seriously. Whether it’s a purchase you’re making, an investment you’re looking into, or the subject of our discussion today; debt. More specifically, debt counselling fees.
If you’re investigating whether to go through a debt counselling process to help you tackle your debt, you’re going to want to know what the costs are, as well as other important information to help you along the way. That’s the purpose of this article, so let’s look at debt counselling fees, what the process looks like, and how you can become debt-free today.
What is Debt Counselling?
Before we jump into what debt counselling fees look like, let’s look at debt counselling itself. The National Credit Act introduced debt counselling to tackle the problem of debt in South Africa and relieve some of the pressure that it puts on everyday citizens.
The process is intended to help over-indebted people who are struggling with debt by providing budgeting advice, negotiating with credit providers on your behalf for reduced monthly payments, as well as restructuring your debts.
What to Look for in a Debt Counsellor
Now that we’ve covered what debt counselling is, it’s time to go over some of the key things you need to look into when you’re seeking help from a debt counsellor. This is a very sensitive undertaking, so it’s important that you trust your debt counsellors.
We’ve listed some important points for you to be aware of as you look for a company to work through your debt with:
Check for Registration with the National Credit Regulator
In South Africa, debt counsellors need to be registered with the National Credit Regulator (NCR) to legally practice. This is the first and most important factor that you need to check, double-check, and triple-check when you’re looking to work with debt counsellors.
By working with registered NCR debt counsellors, you can be certain that they’ve met the required standards of education, training, and experience.
You can find the list of all registered debt counsellors, including National Debt Counsellors, here.
Look into the Reputation and Experience of the Debt Counsellor
Once you’ve ensured that a debt counsellor is registered with the NCR, your next step is to investigate the feedback they’ve received from clients and their overall reputation in the industry.
Most trustworthy debt counsellors should have a website that you can peruse and learn more about them. Look for details like their time in the industry, their success rate, and their awards or certificates. You can also ask your friends or family members for advice on any debt counsellors they’ve previously worked with.
Fortunately, we at National Debt Counsellors proudly tick the boxes mentioned above.
What Do Debt Counselling Fees Involve?
With a general understanding of debt counselling, let’s look at the fees you can expect to pay. The National Credit Regulator issues fee guidelines for debt counsellors that include an application and administration fee of R350 plus VAT, a restructuring fee equal to the first month’s instalment up to a maximum of R8,000 plus VAT (maximum of R9,000 for joint applications married in community of property), and a reckless lending fee of R1,500 plus VAT.
There is a monthly maintenance fee of 5% of the instalment up to a maximum of R450 plus VAT. These fees ensure you always receive professional service from your debt counsellor and are included in your monthly instalments.
There is also a legal fee payable to the attorneys for obtaining a court order to ensure you are protected from your credit providers for the duration of your debt review. Your debt counsellor provides details of this in your application.
This can sound quite overwhelming, we know. Keep reading, though. We’ve made it a little less complicated below.
How Do Debt Counselling Payments Work with National Debt Counsellors?
The debt counselling process is highly regulated by the National Credit Regulator. This means the fees that debt counsellors are allowed to charge, how monthly payments are collected and distributed, and the time frames for the processes are all contained in the National Credit Act or supporting guidelines from the NCR.
As National Debt Counsellors, we don’t collect any money from your bank account directly. We only work through a licensed and accredited Payment Distribution Agency (PDA) as per the terms of the NCA.
We’ve chosen to partner with the biggest and most reputable PDA in the industry, Hyphen PDA. Every month, Hyphen deducts only the agreed instalment from your account via a DebiCheck-authenticated debit order. They distribute the funds directly to your creditors according to the agreed plan that has gone through court.
We only charge the fees allowed under the NCA and you will see an upfront breakdown of all the fees charged by us and the PDA in your initial assessment. DebiCheck debit orders allow you to easily control your monthly debit orders.
Your debt counsellor will help you set up your DebiCheck debit order when you first begin.
Now that you’re aware of the debt counselling fees, it’s helpful to know how the process of debt counselling works so you can know what to expect and what you’re paying for.
How the Debt Counselling Process Works
The process of debt counselling is much simpler than you might expect. It is summarised in a few easy steps:
Step 1: Request a Free Consultation from National Debt Counsellors
One of our professional consultants at National Debt Counsellors contacts you and takes you through a free, no-obligation financial assessment to determine whether you’re over-indebted. Don’t worry, this process is completely confidential!
Step 2: We Notify Your Creditors & Negotiate a New Payment Plan for You
If you are over-indebted, we then notify your creditors that you’ve applied to go under debt review. From here, you and your assets are immediately protected under the National Credit Act. We also negotiate your loan agreements with your credit providers and restructure your repayments to an amount that’s affordable for you. This means you’ll no longer struggle to make payments each month!
Step 3: Pay a Single, Affordable Monthly Instalment
Once we’ve handled the above steps for you, you begin paying one easy monthly instalment via an accredited PDA, which distributes the funds to your credit providers.
Step 4: We Make the Approved Plan an Order of the Court
Our panel of Attorneys apply to the Magistrates Court on your behalf to make your restructured repayment plan an official order of the court and ensure you remain protected during the process.
Step 5: Your Debt is Paid Off and Your Credit Record is Clear!
Slowly but surely, you’ll pay off your debt. Hooray! Once it’s repaid, we issue you a clearance certificate and notify the credit bureaus to clear your credit record. You are now able to live in financial freedom!
Frequently Asked Questions
We’ve highlighted a few of the most common questions that are asked around the debt counselling process:
Will I Get a Loan After I’ve Paid My Debt?
Once you’ve successfully paid off your debt in full and received your clearance certificate, you can, indeed, apply for a loan. It’s important to remember undergoing debt counselling isn’t a life sentence.
It’s also important to note, however, that you’ll need to start building up your credit score again before doing so. The reason for this is that once you complete debt counselling, you get a clean credit slate.
How Long Should I Receive Debt Counselling For?
This varies according to how quickly you can pay off all your debts. It can last for just a few months, or up to 60 months. Alternatively, if you’re no longer over-indebted and can resume normal repayments.
It’s important to note that debt counselling is not the same as blacklisting. Any record of you being under debt counselling is removed from your credit record once you’ve completed the process successfully.
How Do I Complete the Debt Counselling Process?
Debt counselling is completed in one of two ways:
Firstly, and most obviously, you can complete the debt counselling process by paying off all your debt in full. It’s important to note that this only applies to unsecured credit and vehicle finance. You’re not required to pay off your home loan to complete the debt counselling process as long as repayments on the home loan are up to date.
As your debts are repaid one by one, your debt counsellor collects paid-up letters from your creditors and shares them with you. Once all your debts are completely paid off, your debt counsellor issues you with a clearance certificate and notifies the credit bureaus.
You’re now debt-free, and your credit record is clear!
The second way to complete the debt counselling process is if you have a substantial change in circumstance and can now afford to start paying your debt again at the original contract terms. This means you can be declared no longer over-indebted by the courts.
This only applies if there is no court order in place already declaring you overindebted. It’s important to note that if you request this, you’ll no longer pay your reduced monthly instalment amount, but rather, you’ll need to pay the amounts originally agreed with your creditors when you took out the loans.
You’ll also no longer benefit from the reduced interest rates negotiated by your debt counsellor. In addition, you’ll need to prove to the court that you have had a significant change in circumstance like a major promotion or that your partner has returned to work.
As a rule, we suggest that you rather follow the first option, you can always pay more towards your debt at any stage of the process and thus reduce the time you will remain under debt counselling. You’ll also continue to benefit from the improved terms negotiated for you by your debt counsellor on the first option.
Overall, settling your debt in full is always the best option.
A Brief Warning
It’s important to be careful and practice healthy scepticism towards anyone who tells you that they can get you out of the debt counselling process for a fee by transferring to a new debt counsellor. This is not legal practice, and more often than not, these debt counsellors are not properly registered with the NCR and their actions are not in your best interest at all.
Staying aware of these kinds of scams will save you a lot of time and a lot of money.
Why Choose National Debt Counsellors?
We’re a team of leading debt counsellors who believe that debt doesn’t mean disaster. We assist everyday South Africans who find themselves struggling to meet their monthly financial obligations. Our team of Debt Counsellors are registered with the National Credit Regulator and offers you a free, no-obligation assessment of your financial situation.
If you commit to this process properly, your life can change. If you’re struggling to manage your debt, take that first step towards financial freedom and contact us today. Don’t put it off, because your financial freedom is waiting!
