Having access to credit can be a convenient way to meet financial needs. When it becomes tricky is when you can’t afford to repay this debt. If you aren’t coping with your debts it’s important to take control and protect yourself from getting into more debt.
In South Africa, consumer rights are protected by the National Credit Act. When the National Credit Act was promulgated in 2007, it gave birth to the profession of debt counselling. Debt counselling essentially has the wellbeing of the consumer at heart. To qualify for debt counselling, you need to be over-indebted as defined by the National Credit Act (NCA).
Options for controlling debt include debt review, sequestration or debt administration.
More about using debt administration to pay off debt
With debt administration, your instalments are reduced and paid to your creditors every three months.
Your repayment term is extended and a debt administrator manages your finances.
A court order is sought to set aside a portion of your income in order to cover your basic living expenses. The process continues until your debt is paid off.
Why opt for using debt administration to pay off debt?
The court order prohibits credit providers from taking legal action against you. So you no longer have to worry about getting harassing phone calls from various creditors.
You have the benefit of reduced instalments, so you may have more cash on hand at the end of each month. A smart thing to do would be to allocate that extra cash towards paying off more debts.
You cannot take on any more credit while undergoing the process of debt administration. This way you can avoid falling into the debt trap again and can instead focus on establishing a good credit record again.
The process of using debt administration to pay off debt is designed to help you live within your means.