Debt review can be a lifeline for South Africans drowning in debt, but it’s not the right choice for everyone. While it offers legal protection, lower monthly payments, and the chance to regain control, there are important drawbacks to understand before signing up.
Once you enter debt review, you can’t cancel it at will
This article outlines the disadvantages of debt review so you can make an informed decision about your financial future.
What is Debt Review?
Debt review (also known as debt counselling) was introduced under the National Credit Act in 2005 to help South Africans who are over-indebted. A registered debt counsellor helps you restructure your repayments through a court-approved plan. During this process, you’re protected from legal action and asset repossession, provided you comply with the repayment plan.
While the benefits are clear, let’s unpack the less-talked-about side: the disadvantages of debt review.
1. Limited Access to Credit
Once you enter debt review, a notice is sent to credit bureaus, and you’ll be listed as “under debt review.” This effectively freezes your access to new credit, you won’t be able to open a clothing account, apply for a car loan, or get a credit card until you’re issued a clearance certificate.
While this restriction is designed to prevent further debt, it can be challenging in emergencies or if unexpected expenses arise.
Guardians of Fairness
2. Not All Debts Are Covered
Debt review typically covers unsecured debts like credit cards, personal loans, and store accounts. However, debts that are already subject to legal action, like garnishee orders or court judgements, may not be included in your repayment plan.
This means you could be paying your debt review instalment and still have other financial obligations outside the plan.
3. It Takes Time – Often Years
Debt review isn’t a quick fix. It can take three to five years (or more) to complete the process. Your repayment term is extended to make monthly payments more manageable, but this also means you’ll be in the system longer and end up paying more interest over time.
South Africans under debt review typically remain in the programme for 36–60 months, depending on their debt level and income.
4. Your Credit Profile Is Flagged
Being under debt review is not a blacklisting, but your status is flagged with all major credit bureaus. This can have broader consequences:
- You may struggle to rent property, as landlords often do credit checks.
- Employers, especially in finance or government sectors, may see the listing during background checks.
Even after completing the process, it can take time to rebuild a clean credit history.
exiting debt review?
5. Standard Admin Fees Apply
Debt review comes with a structured fee model regulated by the National Credit Regulator (NCR). These fees are:
- Fixed and built into your monthly repayment plan
- Charged upfront in the first month or spread out
- Non-refundable, even if you exit the process early
Although they’re not excessive, they do reduce the amount paid to creditors in the early months of the process.
6. No Going Back Without Full Settlement
Once you enter debt review, you can’t cancel it at will. You’re legally committed to the process until your debts are fully paid off. This can be frustrating if your income increases or you want to exit early. To exit the debt review process you will only be able to do so if you have settled all your accounts or alternatively if a court rejects the debt counsellors proposal.
7. Limited Control Over Finances
Debt review enforces a strict budget. You pay one fixed monthly amount through a Payment Distribution Agency (PDA), which then pays your creditors. While this offers structure, it also means:
- Less flexibility to adjust your spending
- Challenges if your income fluctuates
- Joint accounts may require both parties to enter the process
Final Thoughts
Debt review can offer much-needed relief for over-indebted South Africans, but it’s not a silver bullet. The disadvantages of debt review include restricted credit access, prolonged repayment terms, and limited financial flexibility. If you’re considering this option, speak to a registered debt counsellor and make sure it aligns with both your current financial position and your long-term goals.
At VHT Attorneys, we help clients make empowered financial decisions. If you’re unsure about whether debt review is the right step, or if you’re already under review and experiencing issues, our legal team can assist. Let us help you protect your rights and plan your financial future.
Very prompt and professional – they keep you up to date with what happening with my account and is very helpful with advice
Tanya Pieterse
Attorney
WHO ARE WE AT VHT
VHT Attorneys is a boutique law firm with a large vision. We provide innovative legal solutions with a renowned standard of integrity and confidentiality.
We help our clients:
- Remove Debt Review Status
- Commercial & Corporate Law
- Labour Law
- Dispute Resolution / Litigation
