Debt this or Debt that, which solution is best?

Which Debt Solutions is better?

With so many debt solutions on how to get out of financial trouble when you’re deep in debt, it’s difficult to know where to begin, especially when you don’t even understand the different options. You may have come across a few terms like – debt administration, sequestration or perhaps debt consolidation or debt counselling, but you don’t even know what they are. Let’s take a look at these. Once you understand what they are  you will be able to make a better, more informed decision.

Debt consolidation

Debt consolidation is usually done by taking out a loan in order to pay off all your debt. This then puts you in a position where you make one monthly payment to pay off your new loan as opposed to pay each creditor seperately . It is important to note that although you now only make one payment a month – the amount of debt you have has not changed. Sometimes a debt consolidation loan needs to be secured, what this means is that the loan needs to be taken out against an asset which you own (a house, a car etc.) and if you cannot make the monthly payment, your assets will be ceased.


  • One single monthly debt payment; but it is only beneficial if you are able to obtain lower interest rate and/or longer terms comparing to your current loans.


  • An untrustworthy environment – unfortunately a debt consolidation company could take advantage of your situation by making you pay more than you should and leaving you in a worse place than what you were before.
  • It could lower your credit score, by obtaining a new loan whilst already in debt it could potentially dampen your current credit score.
  • It creates a chance where you could lose your assets. By consolidating unsecured debt (credit cards, medical bills, student loans etc.) into secured debt your assets become jeopardized.
  • High Cost – Interest Cost, Initiation Fee and Credit Life Insurance Cost (R4.5 per R1000 Loan)

Read 3 reason why you should not get a consolidation loan.


Debt sequestration

Sequestration is a legal process in which the court’s appointed Trustee takes control of your assets to sell them in order to pay your creditors. In order for the sequestration process to take place, a substantial amount of debt needs to be owed and usually you need to have ownership of a significant asset e.g. a house. Under sequestration your salary could be left untouched as your creditors are repaid via the gains from the selling of your assets. Once the sequestration is complete you will be debt free however, you could very well be in a much worse off financial position, only being able to apply for credit or loans after becoming rehabilitated.


  • You are usually able to retain most of or all of your salary and after the process you will not be required to repay your creditors. This also means that there will be no more phone calls and letters from your creditors.


  • The process ends up costing way more than what you initially owe due to filing for bankruptcy and exorbitant legal fees.
  • It is a lengthy process and you can only apply for a rehabilitation order after 4 years after sequestration, which means you cannot apply for loans or credit during that time.
  • Your credit score will rapidly diminish.
  • Sequestration is usually seen as a last resort.


Debt Administration

Debt administration is the process in which, after a court order, the management of your finances are taken over by an administrator, which comes with a cost. The administrator will allow you to take a portion of your income for living expenses and distribute the remainder to the owed creditors. Usually under administration the repayment plan is legally extended which causes the process to be lengthy and could cause a larger amount being paid for interest.  Debt administration can only be applicable to those with debt under R50 000.


  • Eventually the administrator will get you out of debt.



  • Administrators are not fully regulated and therefore could potentially take advantage of your situation.
  • The administration fee cap of 12.5% of the monthly payment is not always adhered to.
  • Can be quite a drawn out process.
  • Not an option for those with debt above R50 000.

Debt Counselling

Debt counselling is professional assistance when you are becoming unable to meet your debt repayments. A debt counsellor could offer free analysis and advice and will negotiate with your creditors for a better structured repayment plan best suited for you (lower interest and or smaller monthly payments).  Usually you will end up having one single monthly payment which would then be distributed to the various creditors by the counsellor, on your behalf, which would also include a small fee. Debt counsellors offer consumers a fair chance in becoming debt free.


  • One lower, affordable monthly debt repayment.
  • Protects you from harassment and legal action from the creditors.
  • Can save you money due to negotiated reductions.


  • You will not have access to new credit while in debt review, which can be seen as a good thing too.


To get a more detailed explanation on anything in the debt counselling process, landscape, whether or not it is a good or bad idea, the fees or how to find the right counsellor for you – simply read any of the informative articles or speak to a debt counsellor for a free consultation.


There are different options for you depending on your situation however, the industry can be unkind to those in financial difficulty and debt. If you are still unclear on what to do – speak to a debt counsellor who can assist you in understanding your current situation and needs better.

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