Pros:

1. Your repayments will be restructured. A counsellor will set aside a certain amount of income for your necessities(food, clothing, transport costs etc) and you then use whatever money you have left to service your debt. You never pay more money than you can reasonably afford.

2. A registered debt counsellor is far more likely to get a response from your creditors when it comes to negotiating your repayments. "If you have gone under debt review, you are showing your creditors that your are committed to paying back the money you owe - even if it takes a little longer."

3. By going under debt review, your creditors cannot start any legal proceedings for 60 days - during this time the client is expected to continue paying the creditors what they can reasonably afford, whilst the debt counsellor is arranging the new debt plan.

4. Once under debt review, you only make one monthly payment - to a payment distribution agency - who in turn pays all your creditors. One easy payment will make your finances much more manageable, says Hirst.

5. If you go the debt-counselling route - rather than apply for sequestration - you are far more likely to get credit later on in life. With debt counselling, once your debts have been repaid the negative information on your credit record is taken off your name, you are free to go out and get more credit if you wish. "It will take years to get your name cleared if your finances were sequestrated."

 

 

Cons:

1. It costs money. You will need to pay the counsellor R50 as an administration fee initially. According to NCR guidelines, the counsellor can then also get a fee equal to the first instalment of your new debt repayment plan (up to R3 500) and thereafter a monthly management fee of 5%  of your monthly repayment.

2. While under debt review you are not allowed to obtain any additional credit or incur any further credit on your existing accounts. Failure to do so will result in the cancellation of the debt review.

3. You will need to cut down on your living costs and start living on a budget. For example, reducing your food bill by buying in bulk or at the cheaper stores, shopping around for cheaper insurance and trying to reduce your transport costs.

A good debt counsellor should be able to advise you on ways to cut costs.

"If you could be paying less for services like insurance, a debt counsellor should be able to pick this up and advise you in that regard."