Debt review can help you regain control of your finances, but you must know how it impacts your ability to borrow money.

In 2024, South African consumers undergoing debt review (also called debt counselling) were reportedly liable for almost R100 billion in debt, paying back about R15 billion each year. Debt review is a formalised procedure introduced by the National Credit Regulator (NCR) to help you if you’re struggling to meet your debt obligations.

According to the NCR, ‘the concept of debt counselling and debt review is often misunderstood, and as a result, consumers miss out on the benefits and the protection that debt counselling offers.’ If you want to regain financial control, you can apply for debt review by engaging with an NCR-registered debt counsellor.

The debt counsellor will help you analyse your debt and monthly financial commitments to pinpoint where you are overburdened. They’ll create a structured repayment plan to help you get out of debt and avoid serious legal action as far as possible. They will consult with your creditors – like retail stores, vehicle finance providers, cellphone contract providers – and propose a repayment plan. While they will mediate discussions, they cannot cancel the debt or reduce the debt amount.

If your creditors agree to the proposed repayment plan, the debt counsellor makes payment arrangements on your behalf to reduce your monthly payments to a more manageable level. However, this will result in an extended payment term.

As part of the debt review process, you will receive a debt review clearance certificate once you have settled all your debt under debt counselling. This is a legal document that removes the debt review status from your credit profile.



Avoid debt review scams

Although debt review is a legitimate practice, there are fake debt settlement companies that will try to exploit your situation. The NCR has warned that there are many false or misleading debt counselling marketing practices: ‘The sole intent [is] exploiting unsuspecting and financially distressed consumers. Some ... promise a certain percentage of debt reduction (even prior to a financial assessment), savings or consolidation. If it sounds too good to be true, it probably is.

Be aware of these practices so you don’t fall victim to them. Before you agree to debt counselling, make sure you understand:

• the debt counselling process from end to end and its consequences,
• the various steps of the process,
• the fees that apply,
• when, where and how you have to pay those fees,
• the prescribed timelines, and
• the provisions to exit debt counselling, before you sign on the dotted line.

How to find a debt counsellor in SA:

• Only a debt counsellor who is registered with the NCR can conduct debt counselling.
• Debt counsellors are registered as individuals and not as a juristic person or company.
• You should be able to check all their details – even if they are using a business or trading name, you have 
 the right to know their name, surname, and NCR registration number.
• You can verify the registration of a debt counsellor with the NCR or, if you think you’re dealing with a shady 
 debt counsellor, send an email to info@ncr.org.za.

Debt counselling is not a savings plan

The NCR cautions that debt counselling is not a savings plan. It doesn’t reduce the amount of debt you owe – instead, the NCR says, ‘under debt counselling, you will be paying reduced amounts. As a result, the repayment period of your debt may increase, and you will take longer to pay off your debts.’ The debt will cost you more in interest over the longer term, so debt review is not a way to save money.

Debt counselling and debt consolidation

You must also understand the difference between debt counselling and debt consolidation. Debt consolidation offers you 1 loan to pay off all your other short-term debt, but it doesn’t leave you debt free. You’ve simply reduced your multiple payments into a single monthly payment to 1 credit provider.

After taking out a consolidation loan, if your credit score remains good and you meet other qualifications, you can still apply for a vehicle or home loan and other forms of credit. Once you enter debt review, in contrast, you legally cannot be granted any further credit until you have cleared your debt.

If you receive a call from someone offering you debt counselling, insist that the caller tells you their source of information and where they received your contact details. Do your homework before you commit to anything they offer.

Debt counselling is a measure intended to provide relief for over-indebted consumers only. Anyone who tells you that you can apply even if you’re not overindebted is misleading you, so do not do any business with them.
 
Can you apply for a loan under debt counselling?

If you apply for debt counselling and enter debt review, you will not be able to apply for credit – like credit cards, home loans or vehicle finance – until you have repaid your debt and received a clearance certificate from your registered debt counsellor.

Remember – debt counselling does not cancel debt. It helps you make reduced payments using disposable income, without having to borrow more money.

While your debt counsellor helps you journey towards financial freedom under debt review, your credit profile will show a flag to indicate that you are under debt counselling. Credit bureaus will not remove this flag until the clearance certificate is issued, so you won’t qualify for any further credit until then.

Debt counselling is not a free service – visit the NCR website for the latest fees. You can also ask your debt counsellor for a written disclosure of the applicable fees before you apply for debt counselling.

The NCR says you must not allow your debt counsellor to pay your credit providers on your behalf. Rather pay your credit providers directly, or use a payment distribution agent. If you are married in community of property, you must apply for debt counselling jointly with your spouse – which means that neither of you will be able to apply for credit until you have the certificate showing that you’ve completed debt counselling.
 
If you need a consolidation loan

Nedbank can help you get back on track financially and regain control of your cash flow with a competitive consolidation loan. A consolidation loan makes sense if you get a better interest rate than the rates you are paying on multiple credit agreements. But it is important to remember that a consolidation loan is not debt counselling or debt review.