Why is Debt Review the best option to Debt Issues?

AUGUST 3, 2015

There are four options, which individuals can consider when they are over-indebted or struggling with their finances. 

“Unfortunately people who have difficulty paying their monthly expenses are desperate and don’t always weigh the different options against each other,” says Wikus Olivier, Debt Management Expert at DebtSafe.

What are the options?

The first option is Administration; which only looks at unsecured debt. This means one’s home loan and vehicle finance are not included for protection. Another disadvantage of Administration is the R50 000 limit of the debt amount. Administrators only pay funds over to credit providers every third month – fees and commissions are high and most people entering the administration process will be worse off.

Another option is getting a consolidation loan.

“Consolidation loans often seem to be the best option, but people borrow money to pay off debt and therefore put themselves into even more debt,” Olivier continues. 

“With consolidation a person only shifts debt from one place to another. Most people will not qualify for a consolidation loan. There are two ways in which a person can consolidate his / her debt. If the individual owns a property and have liquidity in the property; meaning that the property is worth more than what is still owed to the bank. That could be used to finance other debt,” says Olivier. 

He continues, “The other way in which to consolidate is to take out a consolidation loan at the bank. This typically has a limit of R50 000 and the consumer must be able to afford the instalment on top of their existing debt instalments. For most people R50 000 is not enough anyway and the interest and fee charges are also high.”

“Debt review on the other hand is a process aimed at people who are over-indebted and unable to cope with monthly financial obligations. When a person enters the debt review process he / she is protected against legal actions from creditors. We take all legal issues and negotiations from the individual’s shoulders,” he says.

DebtSafe emphasises the fact that being in debt review is not a shame; it is a way to get out of debt step by step and to actually see the light at the end of the tunnel. 

The fourth option is sequestration. It might sound like the ideal solution to get out of debt but the person who is sequestrated loses almost all of his / her assets because they are sold to cover the total of the debt. Additionally, the individual is not allowed to get credit for five years after being sequestrated.

“The sequestration court order stays on record for 30 years at the court,” adds Olivier.

Why is Debt Review the best option?

Debt review offers exactly what a consumer needs to take control of their debt. Besides offering immediate financial relief, it combines all monthly installments into one single reduced instalment. 

“When someone enters the debt review process, credit providers can’t take legal action against them on arrear accounts. This extends to secured debts such as home loans and vehicle finance. Assets are also protected from being repossessed and sold on auction,” Olivier says.

The DebtSafe debt review process is 100% transparent and a relationship manager is dedicated to our customers and will take care of documentation and legal issues. 

“After the successful completion of the debt review process, a clearance certificate is issued to a consumer. This certificate is sent to all credit bureaus to remove all information pertaining to the accounts that were subject to the debt review process,” he concludes.

DebtSafe, South Africa’s most trusted debt review company wants consumers to be aware of the best options to become debt-free.