Debt review is a debt management process that is designed to restructure debt payment plans so that consumers are able to settle their outstanding debts. When individuals are under debt review, the idea is for clients to avoid increasing their debt. The debt review process is governed by the National Credit Act and enforced by the National Credit Regulator.
The amendment of the National Credit Act in 2005 came along with new regulations introduced as a measure to protect consumers. One of the measures introduced was the debt review process.
Once individuals find themselves struggling to repay debt, this may be a convenient solution. It’s important for individuals to be cognizant of the fact that this solution comes with set costs. While the repayment amount is specific to your situation as well as how much you owe on your debt in total, there are various other fees that come into effect during the debt review process.
More about the debt review process and fees that are charged:
Typical fees that apply include a restructuring fee, a once-off application fee of R57 including VAT, a monthly Aftercare fee and a Sundry Fee that is equal to your monthly debt rehabilitation amount for your legal application.
The Restructuring fee is VAT-inclusive and is payable in the first month of the debt review process. A maximum amount of R6840 is payable.
The monthly Aftercare fee is capped at 5% (ex VAT) of your monthly debt rehabilitation amount.
The total fee cost should include the monthly transactional payment distribution fee.
An application fee inclusive of VAT is charged at R57 for your credit check when you apply.
The rehabilitation payment is the amount of money that is distributed to your credit providers.
The sundry fee is a once-off fee that is equal to your rehabilitation payment (min R2000 and max R5500) that gets paid during the second month for the court order /consent order application.
An administration fee of R300 is also charged for basic data and capturing costs.
The PDA fee is 3% of your monthly rehab payment (max R570 including VAT) for each month of services provided.
While debt review is often an option out of a tight financial situation, applicants need to keep in mind that a rejection fee may apply. Having access to debt can provide a simple way to finance emergencies or to provide finance for big-ticket items. For instance, paying for renovations on your home or funding tertiary education can be easier when you have access to credit. Your responsibility will be to make sure that you repay the debt and the interest on time. Once you find that you are unable to keep up with your repayments it may be worthwhile to consider undergoing debt review.
Being under debt review doesn’t mean that you are blacklisted. Once you have repaid your debt, the review will be lifted, so you will be able to apply for credit again. Debt review status can be removed once a clearance certificate is issued.