Debt counselling has been around for just over a decade in South Africa. A lot has changed since it was originally introduced. There were very few options for consumers struggling with their debt before debt counselling existed. For consumers with assets, personal sequestration was available. For consumers with large amounts of short term debt, administration was available. There was a big gap for everyone in-between.
Informal Negotiations With Credit Providers
Consumers tried to negotiate with credit providers themselves, though this was not a formal solution. Negotiating with the bank/credit provider is a temporary fix and can be reversed at any time. The consumer is liable for all of the arrears and short payments made during this informal negotiation period.
The other buzz word for over-indebted consumers is consolidation. Most consumers wanting to sort out their debts think they need a consolidation loan. Although the concept seems simple, a consolidation loan is still another from of debt and essentially another loan. This is why credit providers lay down strict criteria before granting this type of loan.
The Introduction Of Debt Counselling
Debt counselling was introduced in 2007 as a solution that would benefit both credit provider and consumer. The consumer benefits by paying a lower, affordable monthly instalment. The credit providers benefit by receiving a solid payment plan and ensuring that they get their cut. The debt counsellor is essentially the middle man. The debt counsellor facilitates the process and ensures fairness between the consumer and his debtors.
It took a while before the debt counselling process started taking shape. Debt counsellors themselves had to start putting processes and systems in place, as the processes and guidelines were vague. It is safe to say that debt counsellors paved the way and molded the process into what it is today.
Debt Counsellors Everywhere
Loads of legal and financial professionals signed up to become debt counsellors in the early stages. Due to the complicated nature of the process, only a few have survived. To successfully execute the debt counselling process and ensure clients make it all the way to debt freedom, a large, skilled team is required. A lack of scalability and an in-depth knowledge of the intricacies of the process seem to have caused many debt counsellors to shut down. There were also many debt counsellors who were in the business for a quick buck, as sad as that seems.
Debt Counselling Fees
Many people criticize the debt counselling fees, but these seems to compensate debt counsellors for the great job they do in getting consumers out of debt. For most of them, debt counselling is the only option they have. This is due to their over-indebted financial situation, often referred to as being blacklisted.
Debt counselling, when correctly executed, is a fantastic process. It instantly relieves the consumer of stress and puts them into a more manageable financial position. The consolidation of debt instalments makes budgeting much easier and allows the consumer to manage debit orders effectively. The largest relief comes from making the debt repayments more affordable. By stretching the payment term and reducing interest rates, debt counsellors are able to reduce monthly debt instalments.
Today there is still a large demand for the debt counselling process and there are plenty of debt counselling companies doing a great job. Read THIS to get a complete checklist of how to choose the correct debt counsellor, should you be seeking help.
When Is It Best To Seek Help?
If you are struggling to manage your debt and run out of money before payday each month, perhaps you need some assistance. It is better to ask for help sooner rather than later and get on the right track as soon as possible. Debt counsellors will give you a free assessment which includes pulling your credit report and running through a budget. The debt counsellor will then give you some advice and offer you a suitable solution if you qualify. The aim of the advice is to help you manage your debts and clean up your credit report.