Debt Review in South Africa is a debt relief program that assists consumers who are in too much debt to get out of it. In 2007, the National Credit Act (NCA), introduced this process to protect consumers from being blacklisted, and to help them deal with the consequences.
This is a great option for South Africans who have a low income and are struggling to make ends meets. This is especially true for those who are further in debt and can’t keep up with their monthly debt payments. Debt review in South Africa is more secure and effective than consolidation loans which are often short-term fixes or lead to consumers falling further into debt.
Debt review Meaning
Debt review in South Africa is the process of analysing your financial position and looking for cost-effective solutions to debts.
The benefits of debt review are many, including an increased cash flow, reduced interest rates on loans, improved credit scores, better ability to borrow money in the future at affordable rates.
How to Get Out of Debt Review?
Here are some strategies to help you get rid of debt quickly if you are over-indebted or on the brink. However, the best way to get out of debt review is to work with a professional debt counselor.
Every Month
Although you can eventually get out of debt by sticking to minimum repayments, it could take many years before all of it is paid off. This excludes the possibility that you will increase your debt by purchasing new credit cards.
It doesn’t matter if the loan is a credit card or a loan, it’s better to pay off the balance as soon as possible. Pay lump-sum amounts that are greater than the monthly minimum. You will save money over the long term by paying less interest as time goes.
However, before you make any prepayments, ensure that your creditor doesn’t charge additional fees. There are some creditors that charge extra for advanced payments, or payments above a certain monthly amount.
Use the Capitec and Nedbank online debt calculators to help you determine the savings and cost of repaying more on your credit card each month.
How to Organize Your Budget
It’s not too late to organize your budget, especially if you are already over-indebted. You can reduce expenses by using a 50-20-30 budgeting strategy. However, it won’t deprive you of a happy life.
This scheme requires that 50% of your household income be used for essentials such as groceries, utility bills and insurances. The remaining 20% must be used to pay off debts and invest. You can spend the 30% remaining cash on luxuries and debt repayments. If you are smart and want to quickly get out of debt, you can reinvest the extra money in your debt repayments.
You can also use mobile apps such as 22Seven and MoneySmart to help you manage your budget.
Once your income has been deposited into your account, you can automate payments and bank transfers. This will allow you to stay on top of your debt payments and save money for other important expenses.
You can use either The Snowball Method or The Avalanche Method
This debt repayment method works in the same way a snowball does: it gets faster and bigger as it goes downhill.
This concept is based on the payment of all debts, from the smallest to the largest. All excess funds are used to pay the smallest debt first, and then allocate the minimal repayments for other loans.
Clearing the smallest debt is the goal. Then, you can use the extra money to pay the next. You will feel more motivated to repay all your loans until you are debt-free because of the psychological impact of clearing one debt after another.
You can repay an R30 000 debt with R500 even if you start small. To avoid the temptation to use them again, the key is to reduce expenses and close off any unpaid accounts.
The avalanche method, on the other hand, deals with debt with the highest interest first. This is a cost-effective way to pay off balances. The interest rate is calculated on the outstanding balance. A larger balance will result in higher interest rates and deeper debt. You can save money by paying off the largest debt first. This will reduce the negative impact of interest rates and help you pay off your debts quicker.
You can get out of debt quicker by using either the snowball or avalanche methods. Each of these methods will help you organize your finances and determine which debts to address first.
There are many ways to combine both approaches. You’ll be able to get out of debt quicker than you might have expected if you can focus and follow through with your repayment plans.
Consolidating Debt
Consolidating loans allows you to consolidate all your debts into one account. This makes it much easier to manage and pay. You don’t need to deal with different creditors or interest rates.
Before you decide to use this method, consider how much interest you will save. Consolidated loans have a longer repayment period, even though they have lower interest rates. To avoid being penalized for lump-sum payments, read information on advanced payments and any associated fees.
Negotiate Interest rates
It is possible to ask your lender for a reduction in your interest rate on your credit card. Many SA citizens will negotiate lower interest rates to pay off their debts quicker. Don’t be afraid of getting out of debt as quickly as possible.
Creditors will prefer customers with high credit scores to those with low or mediocre credit ratings. Because they are more likely to make on-time payments, they can get a lower interest rate.
Don’t Want
Don’t let things accumulate in your home. Why not make some extra cash by selling them? You can easily increase your cash flow by selling unwanted or unneeded items.
Practice Scarcity
You won’t get out of debt quicker if you live in luxury. Reduce your expenses and increase your savings if you want to get rid of debt as quickly as possible.
Living a minimalist lifestyle means avoiding outside eating, buying clothes that you don’t use, and avoiding unnecessary spending.
What is a Consolidation Loan?
Consolidating your debt means that you combine all of your debts into one manageable amount. Consolidating your debt means you apply for a consolidation loan. This will allow you to combine multiple payments into one, often with a lower interest and new terms. A debt consolidation loan may be a good option if you are struggling to make ends meet each month. To make this work, you will need to be disciplined and committed.
The benefits of a consolidation loan
Applying for a consolidation loan to consolidate debt has many benefits. This is a smart decision when you want to pay off multiple debts. You can also save money. There’s more…
- Save on interest: Consolidating all of your debts into one payment means that you only need to worry about one fixed interest rate.
- Paying a lower monthly instalment: Living to pay off debt is not a way to live. A consolidation loan for debt can help you maintain your credit payments while still having enough money to pay for daily living expenses. A consolidation loan can be used to consolidate debts that were owed to multiple creditors. This means you have more money each month to build up savings that will prevent you from falling into bad credit in the future.
- Increases credit score: Credit score can be affected if you are having trouble paying your debts on time or missing payments. It will make it easier to keep your credit score healthy by combining all of your debts into one, lower monthly instalment.
Looking for Debt Review in South Africa?
Debt Rescue is a registered Debt Review and Debt Counsellor who can help you with your debt troubles. Whether you are struggling to make payments or have no idea how to get out of debt, speak to the professionals at Debt Rescue!
Debt Rescue is registered with the NCR and their rates and fees are monitored and controlled by the NCR.
FAQs
Is debt review a good idea?
Debt Review is a process regulated by the National Credit Regulator. It is designed to help heavily indebted individuals to reduce their debt. Speak to a professional to find out if you qualify.
What debt review?
Debt review is the process of analysing your financial position and looking for cost-effective solutions to debts. The benefits of debt review are many, including an increased cash flow, reduced interest rates on loans, improved credit scores, better ability to borrow money in the future at affordable rates.
Can I get a loan when under debt review?
No. You are restricted from taking out any more debt while under debt review.
Who qualifies for debt review in South Africa?
Debt review is designed to help overly indebted individuals. Speak to a professional to find out if you qualify.