Debt counselling was introduced as part of South Africa’s National Credit Act (NCA) in 2007 to provide over-indebted consumers with a structured path out of financial distress. Despite being available for over 15 years, this legal debt solution remains widely misunderstood, leading many South Africans to avoid seeking help when they need it most. This is due to a lack of education and an increase in unscrupulous industry participants.
The debt counselling operates within a complex ecosystem involving debt counsellors, credit providers, the National Credit Regulator (NCR), credit bureaus, and legal representatives. This multi-stakeholder environment often makes it challenging to deliver a consistent customer experience, which has contributed to the process’s damaged reputation over time.
It’s important to understand that the counselling process isn’t a one-size-fits-all solution. It’s specifically designed for consumers who are over-indebted or likely to become over-indebted shortly. According to the NCA, you’re considered over-indebted when your monthly income cannot cover both your essential living expenses and your debt repayments.
Consider this example: Sarah earns R15,000 per month. Her living costs are R9,000, and her debt repayments total R8,000. She’s short R2,000 every month, making her technically over-indebted. This situation typically leads to borrowing more money or missing payments, both harmful outcomes that debt counselling can help prevent. By restructuring Sarah’s repayments and negotiating lower monthly instalments with her creditors, the process provides her with an affordable payment plan that fits within her budget.
Let’s examine and debunk four common misconceptions about this valuable financial wellness process:
Misconception 1: Debt Counselling Will Ruin My Credit Record
This is the most popular myth. When you enter DC, your credit profile is flagged to indicate you’re undergoing the process. This flag serves a protective purpose, preventing credit providers from extending additional credit to you while you’re working to become debt-free. Most over-indebted consumers should not be applying for more credit in their current state.
What many people don’t realize is this: if you’re considering debt counselling, your credit record is likely already damaged. Most over-indebted consumers have low credit scores, high-risk indicators, and payment defaults. The process works to rehabilitate your credit by ensuring consistent payments, catching up on arrears, and preventing further debt build-up. Once completed, the credit flag is removed. You’ll emerge debt-free with a restored credit profile, and there will be no permanent record that you were under debt counselling.
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Misconception 2: I’ll Never Be Able to Get Credit Again
This misconception stems from confusion between temporary restrictions and permanent consequences. While you’re under debt counselling, you can’t access new credit or use existing facilities. This is a temporary restriction that protects you from accumulating more debt.
After completing the process and receiving your clearance certificate, you’re free to reaccess credit if you wish. Your record will be clean, and many people go on to responsibly use credit for large purchases like cars or homes. The restriction is there to help you succeed, not to limit your future.
Misconception 3: Debt Counselling Is Only for People with Severe Financial Problems
Debt counselling is a proactive solution, not a last resort. More than 14,000 South Africans apply for debt counselling every month, and they represent a wide range of financial situations. You don’t need to be facing legal threats to qualify. If you’re battling to cover your monthly repayments, you may already qualify.
Acting early can prevent legal action, repossession, or even bankruptcy. The process also provides legal protection from creditors, as your debt counsellor becomes the middleman between you and your credit providers. It’s a constructive option that has helped thousands regain financial control.
Misconception 4: Debt Counselling Doesn’t Work
The effectiveness of this process depends on choosing a qualified, registered debt counsellor and staying committed. Hundreds of consumers complete the programme each month and receive clearance certificates confirming their debt-free status.
For it to work effectively:
- Choose an NCR-registered counsellor who follows the Debt Counsellors Rule Set (DCRS)
- Ensure proper systems and procedures are followed
- Verify that fees comply with NCA regulations
- Make consistent monthly payments throughout the process
If you’re consistent, you could become debt-free in 60 months or less, depending on your financial situation. The leading cause of failure is missed payments, which break the agreed plan. But with the exemplary commitment, this process has a proven track record.
Remember: Debt counselling is a legitimate, legally recognised process designed to help over-indebted South Africans regain financial stability. If you’re struggling with debt repayments, don’t let myths stop you from exploring your options. Speak to a registered debt counsellor to see how this solution could help in your situation.