Free or Paid Debt Counselling Services – Which is the Better Option?
Overview
Debt counselling is a formal process governed by the National Credit Act (NCA.) It is a service that can only be offered by a qualified debt counsellor who is registered with the National Credit Regulator (NCR.)
A debt counsellor can help you manage the repayment of your existing debt in the most effective and affordable way. This may include negotiating lower interest rates or postponing loan repayment.
A debt counsellor may suggest debt consolidation and will help you manage your finances.
Debt counselling may help you find a solution that is specifically tailored to your needs. A counsellor will match your income and spending and help you manage your finances more efficiently.
Free or paid debt counselling services?
If you opt for free debt counselling in South Africa, you need to consider that you may have to deal with limited services and you don’t get to choose who you work with.
Debt counsellors are required by the NCR to disclose fees upfront.
Debt counselling fees are subsidised for individuals earning less than R2500 a month. You should not be made to pay more than R3000 for your first payment.
If you opt for paid debt counselling services, keep in mind that the debt counsellor can take 5% of each payment each month.
The first month is earmarked for the debt counsellor and the amount paid may not exceed R6000.
The second month is for legal fees.
From the third month, distribution towards your creditors must begin.
Debt counsellors are allowed to charge fees which include:
- A once-off restructuring fee
- A once-off application fee
- A sundry fee
- A monthly Aftercare fee
- A monthly Transactional Payment Distribution Fee
When trying to decide whether to choose free or paid debt counselling services, it’s important that you consider what kind of service you need. Do your research to make sure that you are assisted by a registered debt counsellor.
