If you boil it all down and keep it super simple, Debt Review isn’t an overly complicated process to get your head around. If you are “over-indebted” which means that at the end of the month you don’t have enough money to pay all your bills, you can raise your hand and ask for a little help in reducing your monthly debt repayments to your creditors.

But what sort of reduction can a Debt Counsellor end up negotiating on your behalf with your creditors?

Is it a blanket 50%? You often see that type of number being thrown around in all sorts of marketing messages nowadays. The truth is, that number is only partially correct.

In this week’s blog post we are going to deliver the facts and straighten out a few untruths. Sometimes Debt Counsellors can reduce your monthly debt repayments by as much as 50%, but in other instances, it might only be 30% and sometimes we may only be able to haggle a 20% reduction with your bank. It all comes down to the type of credit agreement you have in place. That’s the key.

Before we get into the nitty-gritties, it’s important to note that finance agreements can broadly be split into two categories:

• Unsecured finance agreements.
• Secured finance agreements.

An unsecured credit agreement such as a personal loan, credit card, retail store account, or payday loan isn’t a loan with an asset attached to it. If you walk into an Edgars store to open up an account, to ‘buy now and pay later, the shop assistant isn’t going to ask you to take off your gold watch as security against the R10 000 facility you are about to open. When it comes to unsecured credit agreements, we can generally reduce your monthly repayments by 50%.

Let’s create a quick hypothetical scenario to better illustrate this point.

Mary has two personal loans with Bank X and Bank Y. She also has a retail credit agreement with creditor Z, and in total, she owes R100 000 with repayments of R10 000 per month. If we can prove that Mary is over-indebted, we can reduce her R10 000 per month repayment by as much as 50%, which would be a new restructured repayment of R5 000 per month.

If you own a vehicle and it’s still financed with a bank, you have what is called a secured asset credit agreement. All that means is that the bank has your vehicle as security and if you default on your repayments, they can always pick up the car. When it comes to vehicles and Debt Review, there are three things you need to remember – the most important thing being the amount we can negotiate.

We have to offer your creditor at least 70% of your current monthly repayment.

If you are getting around in a super-fly ride that is costing you R10 000 per month, then we would need to offer your creditor at least R7 000 per month if you go under Debt Review. We also need to make allowance in your budget for insurance on that vehicle, so keep that in mind if you are doing a few rough calculations on the back of a napkin.

Two other things to remember.

• Credit providers will only accept one vehicle per applicant, so if you are married and have two cars in the family, that’s cool.
• Your vehicle repayments need to be up-to-date (or almost up-to-date). You can’t be six months behind on your repayments and then expect a Debt Review company to try and untangle that mess.

Own a house?

Like a vehicle, a house is an asset, and it falls into the secured asset finance agreement loan bucket. If you default on your mortgage repayments, the bank is entitled to take your home back and auction it off to recover their monies.

If you enter into Debt Review with a home loan, what type of reduction can we offer your bank? We have to offer your bank 80%.

That means if your monthly bond repayment is R10 000 per month, we would need to offer your bank R8 000 per month and you would get a reduction of R2 000 per month.

Want to have a go at working this all out yourself?

All you need to do is get statements from your creditors and analyze what your monthly debt repayments are. Then apply the following:

• 50% reduction on your personal loans, credit cards, retail store accounts, and payday loans.
• 30% reduction on your monthly vehicle repayments.
• 20% reduction on your bond repayments.

Or you could save yourself the hassle and get in touch with us via our dedicated WhatsApp line. We will pull down your details from the credit bureau for free and analyze your situation with our in-house attorney before giving you an accurate idea of what we can reduce your overall monthly debt repayments down to.

Click here to start a confidential chat with us on WhatsApp

Many thanks for your time.

Brendan Els

Director

South African Debt Advisors (Pty) Ltd NCRDC 3434