Understand the 10 components of debt review that you need to know about. Discover the advantages that consumers may enjoy from the debt review process. And let’s address the burning question: does it genuinely benefit all individuals burdened by overbearing debt?
Debt review is a regulated debt relief solution that aims to assist over-indebted consumers in managing their monthly obligations. It operates under the rules and regulations prescribed in the National Credit Act, Act 34 of 2005, allowing individuals to consolidate their debts into one affordable monthly installment.
Why Debt Review: Learn about the purpose of the Debt Review Process
The purpose of debt review is to help consumers who are overindebted by providing them with a more manageable payment plan. This is done before creditors resort to legal collection processes, ensuring that all assets are protected from being sold to recover the debts.
Understanding the 10 vital components of the Debt Review process is crucial for the following 5 reasons:
1. If the consumer chooses to undergo the debt review process but fails to comply with the rules and regulations outlined in the National Credit Act, the process will have negative consequences for them rather than being beneficial.
2. In addition to this, it is always advisable to have a complete understanding of any program’s rules and restrictions before participating in it in order to fully capitalise on all of its benefits.
3. If a consumer opts to continue with the programme but does not adhere to the debt review program’s rules and regulations, the programme will terminate due to non-compliance. As a result, the consumer will have no other option for debt relief except personal bankruptcy.
4. It is critical to learn about the payment plan’s basis, the components covered by the monthly installment, and the possibility for changes in the installment based on negotiations with creditors. Failing to understand these aspects can significantly impact your personal finances. Therefore, it is of utmost importance to fully grasp the entire process, both the positive and negative aspects.
5. Furthermore, it is crucial to fully comprehend the debt counselling procedure before proceeding, as it will adversely affect your credit profile. Even if you decide to stop the process after signing all the necessary documents, it will continue to negatively impact your credit profile until you completely pay off the debt.
Given the above, it’s clear why it’s so important to understand the ten essential components of the debt review process.
Ten important things to know about the debt review process:
1. Registration with the National Credit Regulator is mandatory for all debt counsellors.
2. Consumers will make a single, consolidated monthly payment.
3. The monthly installment may be reduced by up to 50% of the original total monthly payments. The debt’s payment period will be extended.
4. The debt counsellor will renegotiate interest rates and propose a reduction in the interest rate on the debts.
5. Debt Review is a viable debt relief solution only if the monthly instalment is genuinely affordable and is consistently fulfilled until the debt is fully paid.
6. If a consumer under debt review fails to make payments in accordance with the renegotiated agreed-upon monthly instalment, the creditors have the right to withdraw from the debt review program and continue with legal collection processes to recover any outstanding monies owed to them.
7. If the monthly instalments are made meticulously and without fail, all legal action is suspended, and no legal collection processes will be pursued while the consumer is under review.
8. The consumer will not lose their house or vehicles that are still financed, unlike debt relief solutions such as sequestration, insolvency, or bankruptcy. These accounts will be included in the debt review process.
9. It is important to keep in mind that, even though it is mentioned above that you will not lose your home or vehicles during debt review, this is not a guarantee if the house and vehicle are already in arrears. Even if you are currently undergoing debt review, the bank has the right to repossess the immovable property and/or vehicle and sell them at auction if they are already in arrears.
10. It is imperative that you keep in mind that no debt counsellor is permitted to receive any funds in a standard business account. Payment of all instalments is required to be made to the designated distribution account of the NCR-accredited distribution company.
In conclusion:
The 10 critical components listed above are extremely important to understand prior to participating in the debt review process. This will ensure that you did a proper investigation into the different debt relief solutions available in South Africa to consumers.
Call Insolvency Care today for more information and to learn how you can regain control over your finances. Assessment and consultation are FREE!