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What is debt counselling and debt consolidation?

Debt counselling is a solution designed for overindebted South Africans who are struggling to manage their finances. The process involves a debt counsellor assessing a client’s outstanding debt and implementing a restructured payment plan. This is done through negotiating lower interest rates with credit providers, as well as extending the debt repayment terms.

Debt consolidation is a form of debt refinancing aimed at simplifying multiple debt repayments. It involves taking out a new loan and using it to settle your outstanding debt. This will then leave you with a single monthly instalment with a reasonable interest rate.

Why debt counselling or debt consolidation?

Debt counselling is a formal, well-monitored solution for the overindebted. The benefits include extended payment terms, lower interest rates, protection of your assets, and getting legal protection from your creditor.

Debt consolidation applies to anyone who wants to simplify their debt repayments. The benefits include making a single payment at the end of each month, paying less on interest and monthly fees, and settling accounts that have plagued your credit score.

What are the differences?

Both debt consolidation and debt counselling help you sort out your finances – but they do so in very different ways. The best solution for you will depend largely on how indebted you are, and whether you have missed any payments.

To apply for debt counselling you must be overindebted or unable to make repayments. This usually means you have missed payments or been threatened with legal action. Debt consolidation, on the other hand, is only an option if you have not missed previous debt payments and you have not had legal action taken against you.

Your debt counsellor will investigate your case individually and recommend the best solution for your unique debt-puzzle.

How can Justmoney help?

You can apply for debt counselling or debt consolidation through a variety of financial institutions and debt counselling companies - but the key is finding one you trust. 

Justmoney has partnered with the best in the business to bring you an easy, user-friendly, and trusted experience. We act as the middle man between you and your ideal debt provider. 

To get your application going, all we need are details such as:

  • your full name
  • ID number
  • cellphone number
  • email address. 

But wait, how can the overindebted pay for this?

Debt management companies do not charge any fees upfront. After filling in the application form, a debt counsellor will call you to find out more about your credit history and debt.

Once the counsellor understands your unique situation, you will be advised to either consolidate your debt or start your debt counselling journey.

In either case, the counsellor will restructure your debt, for example, by consolidating it under a single payment or negotiating lower interest rates with your creditors.

Going forward, you’ll pay less towards your debt each month and part of that lower payment will be used to cover the service fee of your debt counsellor.

For example, if you used to pay R5,000 in debt each month, your debt counsellor may have reduced your payment to R2,800 and then added a R200 service fee. This means you’ll pay R3,000 each month going forward, which is R2,000 less than it was before debt counselling.

Applying through Justmoney means that the debt management company you end up working with will pay Justmoney a small sum for the referral.

If you have any questions about debt counselling or debt consolidation, refer to our handy debt guide or get in touch with us on our Contact Us page.

 

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