Debt Counselling and Debt Review

Debt Counselling and Debt Review

Debt Counselling was introduced as a solution to over-indebtedness with the promulgation of the National Credit Act in 2007.

For many years consumers who found themselves in dire straights had only 2 definite solutions, both of which had severe consequences for the consumer’s ability to apply for credit again.

One solution was sequestration which essentially saw the consumer being declared insolvent. The other solution was administration. Administration was a highly ineffective solution and kept consumers in debt for many years.

Debt Counselling is also known as Debt Review. Through this process a consumer’s affordability is calculated, a repayment plan constructed and presented to the consumer’s credit providers. The payment plan will contain a detailed illustration of installments, interest rates and terms. Only a registered debt counsellor can construct this payment plan and negotiate with the credit providers. a Debt Counsellor has to register with the National Credit Regulator (

All accounts are included in the payment plan, covered by one installment. The consumer will make monthly installments which will be disbursed to the credit providers through a Payment Distribution Agency (PDA)

Should a consumer successfully complete the process, a clearance certificate will be issued. This certificate confirms that the consumer is no longer over-indebted, and that the consumer can apply for credit again.

The idea behind debt counselling and debt review is to get a consumer rehabilitated into the credit market. Keeping a consumer in debt and unable to partake in new credit is not good for the economy and the wellbeing of the consumer.

A consumer who is heavily over-indebted and who signs up with a registered debt counsellor will immediately see the benefit of the debt counselling process.

The benefits of Debt Counselling or Debt Review are as follows

One single and affordable installment

The consumer’s budget is analysed to make sure the consumer can afford the installment that will be presented to the credit providers.

Debt Counsellor

A consumer has access to a dedicated debt counsellor who represents and negotiates on the consumer’s behalf.

Protection against legal action

The National Credit Act prohibits a credit provider from taking legal action whilst a consumer is in debt counselling or debt review.

Reduced Monthly Installments

Original installments are reduced. This ensures that the consumer’s cashflow improves to afford basic living expenses.

Reduced Interest Rates

As part of the payment plan negotiations interest rates are reduced, saving the consumer thousands.

Restored Credit Profile

Debt counselling and Debt Review has been designed to restore a consumer’s credit profile so a consumer can qualify for credit again.

Considering these benefits debt counselling or debt review is the best solution for a consumer who is over-indebted.