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Factors that affect debt counselling costs in South Africa

Debt counselling is a very real neccesity for many who struggle with debt. It can help you get a grasp on your finances and work about them appropriately. However it can be a complex job and depending on the severity can be very expensive. Here are few of the factors that affect the overall cost of debt counselling: 

• Total Debt Amount: The total amount of debt a person has is a significant factor. Generally, the more debt there is to manage, the higher the potential costs of debt counseling.
• Number of Creditors: The number of creditors a person owes money to can impact the complexity of the debt counseling process. Managing multiple creditors may require more time and effort, affecting costs.
• Income and Expenses: A debt counselor will assess the individual's income and expenses to create a realistic budget and repayment plan. The complexity of the financial situation can influence the cost of the counseling services.
• Type of Debt: Different types of debt (credit cards, loans, mortgages) may require different strategies for repayment. Managing various types of debt may affect the overall cost of debt counseling.
• Legal Fees: In some cases, legal assistance may be required, especially if the debt counseling process involves negotiating settlements or dealing with legal actions. Legal fees can contribute to the overall cost.
• Debt Counseling Firm's Fees: Different debt counseling firms may have varying fee structures. Some charge a percentage of the monthly debt repayment, while others may have fixed fees. It's important to understand the fee structure before engaging a debt counseling service.
• Complexity of the Financial Situation: If the individual's financial situation is particularly complex, involving multiple sources of income, assets, or other complicating factors, it may require more time and effort from the debt counselor, potentially increasing costs.
• Duration of the Debt Counseling Process: The length of time it takes to successfully complete the debt counseling process can influence costs. Longer-term counseling may result in higher fees.
• Regulatory Compliance: Debt counseling firms must comply with regulations set by the National Credit Regulator (NCR) in South Africa. Compliance with these regulations may involve certain costs that could be reflected in the fees charged.
• Negotiation and Settlements: If the debt counselor is actively negotiating with creditors to lower interest rates, settle debts, or arrange more favorable terms, this can affect the overall cost of the service.

Why is debt counselling important?

Debt can be a complex thing to manage and often can get out of hand. It is important for one to have a grasp on their debt as it affects their overall salary. Here are a few reasons why debt counselling is important: 

• Legal Protection: Debt counseling is a legally recognized process in South Africa, regulated by the National Credit Act (NCA). It provides legal protection for consumers who are over-indebted, offering a structured and regulated means of addressing financial difficulties.
• Avoiding Legal Action: Engaging in debt counseling can help individuals avoid legal action from creditors. Once a debt counselor is involved, creditors are legally required to cease legal proceedings and collections activities, providing individuals with relief and protection.
• Preventing Asset Repossession: Through debt counseling, individuals may be able to prevent the repossession of assets such as homes or vehicles. The debt counselor works to find a solution that allows the individual to retain essential assets while still meeting their financial obligations.
• Affordability and Sustainability: Debt counseling aims to create a realistic budget based on the individual's income and expenses. The goal is to establish a debt repayment plan that is affordable and sustainable over the long term, helping individuals regain control of their finances.
• Financial Education: Debt counseling often includes financial education components. Individuals are provided with guidance on budgeting, money management, and responsible financial behavior, empowering them to make informed decisions and avoid future debt problems.
• Creditor Communication: Debt counselors act as intermediaries between the individual and creditors. They handle communications with creditors, reducing the stress and pressure individuals may face from constant contact and collection efforts.
• Credit Score Improvement: While debt counseling may have a short-term impact on an individual's credit score, successfully completing the program can contribute to long-term credit score improvement. It allows individuals to demonstrate responsible financial management.
• Regulatory Compliance: Debt counseling in South Africa is regulated by the National Credit Regulator (NCR). Working with a registered debt counselor ensures that the process follows legal guidelines, providing individuals with confidence in the legitimacy of the service.
• Reducing Financial Stress: Financial stress resulting from overwhelming debt can have a significant impact on an individual's mental health and overall well-being. Debt counseling provides a structured approach to resolving financial challenges, reducing stress and anxiety.
• Holistic Financial Solution: Debt counseling takes a holistic approach to an individual's financial situation. It considers all debts, income, and expenses, providing a comprehensive solution tailored to the specific needs and circumstances of the individual.
• Debt Review Certificate: Upon successful completion of the debt counseling program, individuals receive a Debt Review Certificate. This certificate indicates that they have fulfilled their obligations and can now re-enter the credit market.

Finding the right pro

Now that you have a better understanding of the costs – it’s time to find the best Pro for the job.

Luckily for you – Kandua has hundreds of Pros who can debt counselling. 

Here are our top tips to help you find the right Pro for your debt counselling:

• Give the contractor as much information as possible. The more details they have the more efficiently they can quote on the job and also offer their professional advice.
• Once you’ve gotten quotes from different Pros – you can look up their profiles on Kandua and read their reviews and see pictures of their work. 
• Read the quote carefully. Make sure you double-check everything so you know exactly what you are getting yourself into. 

Remember, it’s not always about finding the cheapest option. Stick to these tips, and take into account the entire package, Pro reviews, your experience in dealing with them and then, of course, the cost.