Debt review loans are a form of debt consolidation, whereby a debt counsellor will combine your outstanding debts into one monthly payment. This will be payable to your creditors as per an agreed plan and is a great option for people who struggle to keep up with their monthly repayments. However, there are some things to bear in mind when considering this type of loan.
Firstly, it is important to understand the difference between debt review and debt counselling. The terms are often used interchangeably, but they are very different services with very distinct purposes and results. Debt review is a legal process offered by the National Credit Act to help you manage your debts, protecting you against the ramifications of being declared insolvent. This includes repossession and garnishee orders. A debt counsellor will assess your financial situation and negotiate with your creditors on your behalf to create a debt repayment plan that suits your budget.
In addition to reducing your monthly instalments, a debt counsellor will work with you to cut down on the fees and penalties that you have incurred. This is an effective way to get out of debt quickly, but it’s vital that you stick to your debt repayment plan once you leave debt review. Otherwise, your reduced instalments will fall away and you’ll be back to paying full amounts of money to each of your creditors once again.
It is also vital that you know that a debt review loan will not protect you from being declared insolvent if you default on your payments. As such, you should always pay your debt review instalments on time and never take out additional credit or apply for a home loan while under this process.
You should also be cautious of unethical lenders who will offer you a debt review loan regardless of your status, as they do not have to adhere to the rules and regulations set by the National Credit Act or the National Credit Regulator. Such lenders will typically charge high-interest rates and lend money to people who cannot afford to pay it back. This is considered reckless lending and could put you in serious financial trouble.
While debt review may seem restrictive, it is important to remember that you can still enjoy many normal parts of life. Purchasing clothing on account, applying for a personal loan and even buying a car are still possible – just be sure to start building up your credit score again before you apply, as this will make you more appealing to lenders. Alternatively, you can look into alternatives to traditional loans such as the innovative solution offered by Real Estate Assist. To learn more about how this service works, be sure to contact us today.