Debt Counselling

Everybody’s goal should be to have a good credit score and be financially stable. But, life is unpredictable and it is easy to fall on the wrong side of debt. In South Africa, more than 10 million credit-active consumers (almost 41%) are in arrears on one or more accounts.

What Happens When You Miss Debt Repayments?

Missing one or two debt repayments and subsequently catching up on them will do no real harm to your credit score. But missing consecutive repayments on multiple accounts could cause some damage.

Missing a debt repayment puts you in arrears. These missed payments are recorded on your credit profile with the various credit bureaus. Missing payments will have a negative effect on your credit score.

A low credit score will hamper your chances of obtaining credit, as the lower your score, the higher risk you will be to lenders. It is also a lot easier to damage your credit score than to build it up again.

How Can I Clear My Name?

Here are four ways to clear your name and rebuild your credit score.

1.) Catch up on all missed payments

This one is easier said than done. Try to use any extra cash in your budget to catch up on the previously missed payments. By wiping out the arrears you will once again be up to date with your payments.

Once caught up, you will need to maintain consistent payment behavior, which will build up your score over time. This option will be difficult for consumers struggling with limited surplus cash each month.

2.) Get Adverse / Default / Judgment listings removed from your credit profile

If you miss numerous payments (usually 3 months +) a credit provider might “list” your payment behavior at the bureaus. They mark the account as an adverse or default account.

Usually, the next step would be to hand these accounts to lawyers or debt collectors to collect on. If you have these type of listings on your name, it is best to contact the credit provider and ask for the latest statement and balances.

Try to see how many months behind you are and then make an effort to settle any arrears and get the account up to date. This will remove the adverse / default listing.

In the case of judgments, these would need to be fully paid to be removed from your credit profile.

3.) If you are over-indebted, opt for debt counselling

If your income is not enough to cover all your living expenses and debts, you are probably over-indebted. You should speak to a debt counsellor to see how the debt counselling process can assist you.

Debt counselling aims to assist over-indebted consumers out of debt in an affordable manner. Debt counsellors negotiate with your credit providers on your behalf to reduce debt installments and interest rates.

Once all of your debt has been repaid through debt counseling, you are issued with a clearance certificate. This indicates that all debts have been fully repaid and your credit report is clean and fully rehabilitated.

4.) Try apply for a debt consolidation loan

If you have multiple debts and would prefer owing just one credit provider, you should look into a debt consolidation loan. A consolidation loan is a large personal loan that is used to pay off smaller debts, leaving you with one debt only.

Due to these being risky loans for the banks, the qualification criteria tends to be quite strict. Generally, the banks will look at 3 main factors:

  1. A high credit score
  2. Few or no arrears on current debts
  3. A high affordability (ability to repay)

If you are unsure which option would be best for you, give us a call today or fill out our free callback form. We can do a free financial assessment to see what you would qualify for and which option would be most beneficial.

Let's get started with your free debt assessment

An experienced consultant will contact you to understand your financial situation. We can then recommend the best options to get you out of debt quickly and affordably. In addition, you will get a free credit report & financial health report.