Will Switching From Debt Review To Debt Intervention Help You Pay Less?
This month the President seign a controversial new set of amendments to the National Credit Act. We will soon find out when the new laws come into effect.
The new amendments make provision for the National Credit Regulator (NCR) to provide free debt counselling to consumers who earn less than R7500 as a household and have less than R50 000 in unsecured debt (so no cars or houses).
Some debt review consumers may be wondering if they should try switch from their current debt review arrangement to this new free service. Could you? Should you?
The most average debt review repayment amount is somewhere below R2500 each month. Which means you are paying your Debt Counselor R125 in fees each month for the services they offer and towards future services at the end of the process.
If you were to switch how much could you save?
If you were paying R2500 (including a small fee to your Debt Counsellor} through debt review then through debt intervention you would pay… (wait for it).. R2500 each month. This is because it is what you can afford to pay each month by cutting out unneeded expenses and sticking to a good budget.
It is however doubtful that people paying as much as R2500 each month will qualify for debt intervention. It is much more likely that debt intervention consumers will have repayments of more than R1000 per month based on the target of settling R50 000 debt over 60 months. If you currently pay more than R1000/month through debt review it is likely that your debts amount to more than R50 000 anyway.
If you are in debt review and have less than R50 000 in only unsecured debts then you are probably paying your Debt Counsellor somewhere around R50 per month or less in fees. So, could you switch and rather have that R50 go toward your debts?
This remains to be seen but what you should keep in mind is that debt intervention is not up and running yet. New regulations need to be published explaing more about how it will work and where the NCR will get the millions of rand needed to offer the free service. The NCR will also require time to get set up to help so many hundreds of thousands of consumers. All that will take a while to get in place.
So, for the foreseeable future if you are in debt review with a smaller amount of debt that is where you should remain.
Make those monthly payments (including the tiny fee to your Debt Counselor) and get rid of your debts according to your court order.
Read more about debt intervention vs debt review including how you can end up in jail when under debt intervention in this month’s coming issue of Debtfree Magazine.