If you're struggling with debt, you might have heard about debt counselling as a way to get back on track. But what does it cost, and what should you expect? Let's break down the Debt Counselling Fee Guidelines in simple terms to help you understand how it works.
What is Debt Counselling?
Debt counselling is a process where a registered debt counsellor helps you manage and reorganize your debts so you can pay them off in a way that's easier and more affordable. It's meant to protect you from legal action by creditors while you work toward becoming debt-free.
The Cost of Debt Counselling
Debt counselling isn’t free, but the fees are regulated to ensure fairness. Here’s what you can expect to pay at different stages of the process:
1. Application Fee
When you first sign up for debt counselling, there’s usually a small application fee. This covers the initial assessment to check your financial situation and determine whether debt counselling is the right choice for you.
- Amount: R50 (excl. VAT)
- When: Paid upfront when you apply.
2. Administration Fee
Once you're accepted, there’s an admin fee for processing all the paperwork and setting up your debt counselling plan.
- Amount: Up to R300 (excl. VAT)
- When: Paid along with your first payment.
3. Restructuring Fee
The restructuring fee is for creating a detailed plan to repay your creditors. It includes negotiating with creditors to lower your payments.
- Amount: The lesser of R8,000 or the first month’s distributable amount (the amount available to pay creditors after living expenses).
- When: Paid during the second month after your debt counselling process begins.
4. Aftercare Fee
Debt counselling doesn't end after your plan is created. Your counsellor continues to manage payments and communicate with creditors.
- Amount: 5% of the monthly payment to creditors (capped at R450 per month, excl. VAT).
- When: Monthly until your debt is paid off.
Are There Extra Costs?
Sometimes, there may be additional charges:
- Reckless Lending Assessment Fee: If your counsellor identifies loans that were granted irresponsibly, they may charge for a detailed review.
- Court or Tribunal Fees: If your debt plan needs legal approval, you may pay a separate legal fee.
Why Do These Fees Exist?
The fees ensure debt counsellors can:
- Prepare your repayment plan
- Negotiate with creditors
- Help protect you from lawsuits
- Provide ongoing support during the repayment process
What if I Can’t Afford It?
If the fees seem high, remember that they’re designed to come out of the money you’re already paying toward debts. Debt counselling should never make your situation worse—it’s about finding a solution that works for you.
Benefits of Debt Counselling
- Reduced Monthly Payments: Restructuring often means you pay what you can afford to your credit providers, this amount is determined by the registered debt counsellor.
- Legal Protection: While in debt counselling, creditors cannot take legal action against you.
- Clear Financial Path: A structured plan helps you become debt-free.
How to Get Started
To start debt counselling, reach out to us we can help. We will guide you through the process and help you understand the costs involved.
FAQs
1. Do I have to pay everything upfront?
No, most fees are spread out over time to make it manageable.
2. What happens if I stop debt counselling?
You may face legal action from creditors if you withdraw from the process.
3. Can I apply if I’m already behind on payments?
Yes, debt counselling is specifically for people who are struggling to keep up with their debts.
4. Is debt counselling confidential?
Yes, your financial information is protected by law.
5. Can my creditors refuse the payment plan?
Creditors can negotiate, but most accept plans that are fair and reasonable.
6. Does debt counselling affect my credit score?
Yes, while under counselling, your status is flagged, but this is removed once you complete the process.
Debt counselling can be a lifesaver for people overwhelmed by debt. While it comes with costs, these are regulated to ensure you get the help you need without added financial pressure. If you're considering debt counselling, make sure to choose a registered debt counsellor and understand all the fees involved.