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Debt counselling – the two sides of the coin

By Isabelle Coetzee

Being overindebted doesn’t just put a strain on your personal finances; it also puts a strain on your state of mind. While you’re constantly playing catch-up with your financial obligations, the stress can quickly become a dark cloud looming on your financial horizon. 

The best solution is to start the process of debt counselling so that you can escape the debt cycle. But what are the ups and downs of joining this debt relief programme? Justmoney got in touch with an industry expert to find out more.

Tip: If you resonate with this, apply for debt counselling today by filling in the form on this page.

Consider this before starting debt counselling

Debt rescue, or debt counselling, is an official programme that was created by the National Credit Regulator to help overindebted consumers settle their debt in a way that’s affordable to them, while also satisfying the requirements of their creditors.

According to Tlalane Ntuli, co-founder and COO of Yalu, when you’re in serious financial trouble, debt counselling is the sensible way out. However, while under debt counselling you won’t be able to apply for additional credit.

“Being unable to represent yourself financially means you can’t take out a loan to buy a car or a house, or even pay for university with a student loan. If the debt counselling period is long, as it often is, this can have a massive impact on your life and your family,” says Ntuli.

Therefore, it’s important to be aware of what you’re getting yourself in to. She points out the following pros and cons of joining a debt counselling programme:

Upsides of debt counselling:

  • It can help protect your assets from being repossessed.
  • A counsellor will negotiate better rates according to your affordability levels with your credit providers.
  • It offers the simplicity of only paying one amount for all the credit you have that’s being rehabilitated.

Downsides of debt counselling:

  • You won’t qualify for credit products while being rehabilitated.
  • You will no longer be able to act independently with your creditors, as all your dealings now need to be done on your behalf by your counsellor.
  • Once the process has been started, there is no going back and you have to stick it out.

Try solving your own debt problem first

Before applying for debt counselling, Ntuli believes you must try settle your debt yourself. Although the debt counselling process is a responsible route to take, it’s good to see what you can manage on your own first.

“Once you’ve started the process there’s no going back, so debt counselling really should be the last resort – something you do when you’ve exhausted all other options, including carefully re-examining the structure of your financial life,” says Ntuli.

She explains that meaningful debt action often starts with optimising the costs applied to different financial products.

“When it comes to credit life insurance, for example, many consumers are simply unaware that they could use a different service provider that charges less. This type of saving is important because it can make a difference in being able to meet some of your monthly obligations,” says Ntuli.

READ MORE: Do you still need credit life cover when you have life cover?

Make sure you do your research beforehand, and you ask your debt counsellor all the important questions to be certain it’s the right decision for you.

Fill in the form on this page to have a debt counsellor call you back and chat about your options.

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