Home Loans

With the National Credit Regulator’s provision for debt counseling, combined with the effects of the recession, debt management has become a preoccupation for many an indebted South African. The problem with debt is that it likes more debt and accumulates quickly, leading to over-indebtedness. The following are the generally accepted means of settling your debt.

Debt Counseling
The NCR’s provision allows you to seek the help of a debt counselor. The counselor, after your application for counseling has been accepted, will review your debt and draw a restructure for repayment. This will be negotiated with your creditors and easier repayment terms will be decided on. This alleviates the pressure on you to pay full installments, often results in less interest too. The problem with debt counseling is that you pay for the counselor.

Debt Consolidation Loan
A debt consolidation loan is a very useful means to limit your risk when it comes to debt. By extending the mortgage on your home or taking out a second home loan, a financier gives you money to pay off your debt with other creditors and owe them the money instead. This is great because a bond or extended mortgage is repayable at a lower interest rate and a longer term, making the installments more manageable. The problem with this is that you need collateral in the form of assets (which must be greater than the value of the loan) to secure the loan. If you default on your payments, your possessions get taken.

Debt Settlement Plan
A debt settlement plan allows you to pay of a large sum of your debt, say 50 or 60 percent, in one go. Because the creditor is losing out on all the interest you would have been paying him or her otherwise, the sum is collected into a trust account by a law firm or debt settlement company. Often you will pay a fee for settling your debt ahead of time to make up for the loss of interest.

Bankruptcy
Obviously the least favoured response to debt, bankruptcy implies the inability of the over-indebted to pay their creditors. After filing for bankruptcy, the debt that is owed to all the creditors is reduced to the value of the debtors equity and then distributed proportionately. While this does cancel your debt, you may not apply for credit for anywhere between five and 10 years.

Avoiding bankruptcy, you’d need a large amount of money to settle your debt. The most viable options are debt consolidation and debt counseling. If you are over-indebted, apply for these now.