The debt counselling process has helped many thousands of South Africans to avoid some very bad financial situations and the process has even helped many to avoid having their houses repossessed by the bank.
But, as with most things, there is a cost to going through with the Debt Counselling process and you will need to carefully consider the implications of this decision.
Firstly, you’ll need to realize that debt counseling is not going to remove or even reduce the total loan amounts you are still liable for.
Your approved debt counsellor will, however, negotiate on your behalf to get your creditors and banks to lower your monthly repayments.
This means that your debt payments will reduce on a monthly bases, but you are still liable to pay off the full outstanding debt.
Read More: What Is Debt Counselling?
The problem with debt counseling is that you could take many many years to pay off your debts, and you will not be able to apply for any more loans while you are under debt counseling.
The intended purpose for this program was to give consumers an opportunity to hold on to their assets while they work towards reduce their debt commitments and improve their monthly income.
Debt Counselling – What Are The Costs
Debt Counselling fees are regulated by the National Credit Act, and you’ll need to be cautious of dealing with counsellor who is adding extra fees to your application.
One such counsellor who was charging his clients extra commission, retainers and legal fees was recently ordered by the High Court to refund his previous clients.
Brief Fee Break Down:
Application Fee – R50.00
Restructuring Fee – the restructuring fee is equal to the first payment that a customer makes to the Payment Distribution Agency, up to a maximum of R4000.
Legal or Court Fee – R2850.00
Aftercare Fee – 5% of the PDA payment, this is a monthly fee