How do I pay for Debt Review when I can’t even pay my debts?
Are you drowning in debt and wondering, “How can I afford debt review costs?”
For many South Africans who are struggling to meet their monthly debt obligations, being placed under debt review can be a daunting decision to make as you would seemingly be adding more debt to a pile that seems to augment as the days pass.
"A successful debt review can save you a substantial amount of money in the long run."
It’s a common concern, but there’s good news: debt review fees are manageable, and you don’t have to pay everything upfront.
This guide explains what to expect regarding debt review costs and how you can structure your payments.
Peace of Mind: Debt Review Fees are Regulated
Unlike some debt solutions, debt review fees are transparent and regulated by the National Credit Regulator (NCR). This ensures you’re not hit with hidden charges or unfair pricing.
Breaking Down the Costs:
Let’s explore the typical fees associated with debt review:
Once-off Fees:
- Application Fee (R57.50): A small fee to initiate the debt review process.
- Administrative Fee (R345.00): Covers initial processing and paperwork.
- Restructuring Fee (Varies): Equivalent to your first monthly payment amount. (Example: If your payment is R2500, the fee is R2500)
- Reckless Lending Fee (Optional – R1725.00): If you suspect your creditors engaged in reckless lending practices, this fee allows for an investigation.
- Legal Administrative Fee (Varies – Average R7000): This fee covers legal representation during the court process (if needed) and attorney fees associated with your debt counsellor. This may seem excessive, however once you take into consideration that a specialist in Debt Review will be fighting for you in Court as well as against your Credit Providers in some cases, this amount is reasonable compared to the normal legal fees incurred in other fields of law.
**Important Note: You don’t have to pay everything upfront! Here’s a breakdown of the typical payment schedule:
UPFRONT:
- Application Fee & Administrative Fee
MONTH ONE:
- Restructuring Fee (Creditors are aware they won’t be paid this month)
MONTH TWO:
- Legal Administrative Fee (Creditors are aware they won’t be paid this month)
MONTH THREE ONWARDS:
- Monthly payment according to your debt counsellor’s plan (to the PDA), Aftercare Fees, and PDA Fees.
Understanding Additional Fees:
- Payment Distribution Agency (PDA) Fees (3-5% of monthly payment): A small fee for the secure and efficient distribution of your monthly payment to your creditors. This eliminates the hassle of dealing with multiple creditors yourself.
- Aftercare Fees (5% of monthly payment, capped at R500): Covers the debt counsellor’s ongoing administrative tasks while your application is finalized (e.g., serving legal notices, monitoring your credit, reviewing your financial circumstances).
Addressing Your Concerns:
We understand that any additional costs might seem daunting. However, consider these points:
- Debt review fees are often significantly lower than the accumulated interest and penalties you’d keep paying to creditors.
- The fees are spread out over time, making them easier to manage.
- A successful debt review can save you a substantial amount of money in the long run.
Bonus Tip: Explore Credit Life Insurance
Many consumers unknowingly have credit life insurance on their existing debt. This insurance can potentially cover your debt obligations in case of death, disability, or even retrenchment (for a limited time). Check with your credit providers to see if you already have this coverage.
Utilizing existing credit life insurance can help minimize the need for additional debt during debt review.
Conclusion:
Don’t let concerns about fees prevent you from seeking debt relief. VHT Attorneys can help you navigate the debt review process, ensuring your fees are structured according to your affordability. Contact us today for a free consultation and take control of your financial future!
By: Tanya Pieterse
