10 July 2024

5 Misleading Debt Review Myths Set straight

Submitted by: Carla Oberholzer
5 Misleading Debt Review Myths Set straight

In a world where misinformation spreads like wildfire, it’s essential to separate fact from fiction, especially when it comes to financial solutions. Debt review, or debt counselling, is a lifeline for many South Africans struggling with debt. However, numerous myths surround this process, creating confusion and discouraging people from seeking the help they need. 

Here are some of the most misleading myths about debt review debunked: 

Myth 1: Debt Review is a Scam 

Reality: Debt review, also called Debt Counselling, is a legitimate, regulated process under the National Credit Act, with its operations overseen by the National Credit Regulator (NCR) – South Africa's credit industry watchdog. Registered debt counsellors adhere to strict guidelines to ensure transparent and fair practices. 

Myth 2: Debt Review Will Ruin Your Credit Score Forever 

Reality: Ever heard of: “your credit score drops to 0 for thirty years UNLESS you cancel debt review”? This is NOT TRUE! Debt Review can affect your credit score temporarily due to the flag on your credit profile. The process has a 'rehabilitative connotation' to it so that you can get out of your debt spiral instead of keeping you there. Once you have completed the process and settled your debts, your flag can be removed, and you can slowly but surely rebuild your credit score again. 

Myth 3: Debt Review Will Affect Your Job 

Reality: “You will be disqualified from employment or any position”? False. Entering debt review should not affect your employment. Employers do not typically have access to your credit profile. It may, however, happen that an employer requests access to your credit profile if you have applied for a financial position, for example. 

Myth 4: You Can’t Pay Off Your Debt Faster When Under Debt Review 

Reality: While debt review extends the repayment period of your debt to make monthly payments affordable, you can always pay off your debt faster when your financial situation improves. Making additional payments can speed up the process (**Remember to make payment arrangements via your debt counsellor and payment distribution agent). 

Myth 5: Debt Counsellors Only Want Money & Can Make You Lose Your Home/Vehicle 

Reality: Debt review fees are regulated by the National Credit Regulator (NCR) and a debt counsellor does not work with clients' monies. Only an appointed and registered payment distribution agent (known as a PDA) is allowed to distribute payments as per the payment plan and court order. When a consumer enters the debt review process, legal action from creditors is prohibited. Credit providers can, however, repossess an asset (take away a house/car) when the consumer has signed a letter relating to a ‘voluntary surrender’ OR if a summons (knowingly or unknowingly) was issued before a debt review application OR if presented with a legitimate court order from the high court. 

Busting these popular and misleading debt review myths is crucial to understanding the purpose and reasoning behind the debt review process. It’s a structured and regulated solution designed to help overindebted-declared individuals regain financial stability without the extreme consequences often associated with other ‘debt relief’ solutions or asset repossession. 

If you’re struggling with severe debt and not making ends meet, consider speaking to a reputable and registered debt counsellor to explore how debt review can offer a new start and pathway to achieving future financial freedom.

CreditSmart Financial Services

CreditSmart Financial Services (Pty) Ltd (est. 2018) is a registered Financial Services Provider (FSP 52295) dedicated to improving South African consumers’ financial well-being. Our comprehensive solutions cover credit, debt, and financial management, empowering clients to optimise cash flow, eliminate bad debt, enhance credit scores, foster positive financial habits, and achieve lasting financial relief. With a team of expert advisors and registered Debt Counsellors (NCRDC 3143), we offer tailored products and services throughout the credit-to-debt cycle, including credit (life) cover and short-term insurance. Trust CreditSmart for effective debt and credit management. For more information, visit www.creditsmart.co.za or dial 012 054 5755.