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Car Repossessions

Car Repossessions

Car Repossessions Are on the Rise, Here's How to Avoid Them

Car repossessions are a pressing issue for many people in South Africa. According to a report by the South African Index for March 2021, people in South Africa are experiencing great psychological stress because of the repossessions of their cars. Understanding how car repossession works will allow you to take steps to prevent your car from being repossessed.

If you are facing a repossession, it simply means that your bank or finance provider is taking back items you purchased using credit. Typically, this problem arises because the borrower has not paid all the payments toward their monthly obligations on time, and the vehicle finance account has fallen behind in payments. Vehicle repossession can be frustrating and stressful both for the lender and the borrower.

What Is Repossession?

Car repossession is when a lender takes back a vehicle from a defaulting borrower who financed it to minimize losses. This car is then repossessed and sold to mitigate any losses. Such a situation usually occurs when borrowers fail to uphold all their contractual obligations under the financing agreement.

In most cases, if the lender does not receive seventy per cent of the arrears balance within thirty days, the lender will approach a court of law to retake possession of the vehicle. A lending company will frequently hire a third-party collection company, such as what we refer to as a repo company, to help with the repossession of the vehicle.

What are the reasons why banks repossess cars?

It is imperative to note that there are several reasons when banks repossess cars. The underlying problem is that borrowers frequently fail to make timely payments, and the account falls into arrears. You risk having the car repossessed if you do not make payments on a financed or leased vehicle. It happened because you failed to make your monthly payments on time, and the account went into an unacceptable arrears’ situation. The bank will let you know about the arrears amount due if you fall too far behind on your payments. Whether or not you are willing to work with the bank and make your payments on time or are unable to pay, the bank is entitled to proceed with a repossession court order to repossess the vehicle.

In another case, the bank may repossess the vehicle because the borrower owes more than the car is worth. You can expect a bank to act promptly to reclaim some of the money owed by you through the repossession of your vehicle. You will receive a fair market price for your car when it goes up for auction. If the vehicle gets sold, the proceeds will help pay off the remaining balance on the finance agreement.

Know The Law.

To avoid the repossession of your car, you must first understand the applicable law. It is imperative to remember that the National Credit Act requires that all lenders give the borrower proper notice before taking possession of the vehicle.

Under the National Credit Act (NCA) 34 of 2005, a consumer defaulting on a vehicle finance agreement must receive a written demand letter twenty business days after default. The bank can send this demand letter as early as twenty days after the first default. That allows you a certain amount of time to rectify the arrears situation, and you can take alternative steps to safeguard the vehicle.

Debt counselling can serve as a legal way to protect a car from repossession. A discussion of this essential process will follow later in this article.

How Can You Prevent Car Repossession?

Nobody buys a car using bank finance planning to miss their payments. However, unforeseen circumstances can force you to default on your commitments to repay. Divorce, retrenchment, death of a family member or being diagnosed with a severe chronic illness may result in situations in which you suddenly find yourself drowning and unable to pay for your car. Before you get into financial problems, here are some steps you should take if you are unable to pay your car payments.

Your bank will allow your account to fall into arrears for no more than 75 days before taking enforcement action on your defaulting car finance agreement. As a result, you have a little extra time to formulate a plan to get the account back to normal. Nevertheless, here is some good news for you: Most credit providers would prefer to work with you to avoid delinquency rather than resort to repossession. You can take the following steps if you are having trouble making payments on your vehicle finance agreement:

  • Review your finance agreement. If you do not know the exact terms and conditions of the finance agreement, now is the time to review it. You must be familiar with every detail of the finance agreement, including the interest rate, term, monthly fees, and collection costs. Please familiarize yourself with the fine print in the terms and conditions that pertain to defaults, delinquent payments, and missed payments.
  • Establish a budget and stick to it. To rectify the adverse condition of the finance agreement, create a budget and ensure that you stick to it. Reduce any unnecessary expenses for the next few months to make sure there is enough money to make your car payment. By paying an additional monthly amount, you can pay off any arrears you may have. You will pay this extra amount for the next three months. 
  • Next, you must determine whether this default situation is a temporary or ongoing problem. By building a budget, you will better understand why you can't afford to make your car payments, and you will be able to determine whether this is a temporary issue or a more complex long-term financial problem.
  • There is no need to panic if you missed a payment because there were unforeseen expenses this month. If this is a rare occurrence, follow the steps mentioned above to catch up on any arrears by following your budget. In the case of a more relevant and longer-term issue, we recommend you seek professional assistance. 

When faced with the prospect of going through a repossession, you have a few options to prevent it.

  • Avoid ignoring collection calls and demand letters at all costs. Instead, speak to your credit provider immediately. By using a proactive approach, you may be able to avoid repossession and the hefty legal charges that come with it. Try to negotiate an alternative payment arrangement if possible. Most banks will require an upfront payment of 70% of the arrears balance to stop the collection process.
  • As a second option, you should try to negotiate with the credit provider to make additional monthly payments to settle the arrears. Your credit provider usually gives you three months to resolve the arrears before repossession proceedings begin.
  • Thirdly, if you cannot pay off your arrears or if you have difficulty affording the monthly payments, you may want to consider selling your vehicle. By selling the car yourself before the legal process of repossession begins, you will save a lot of money on legal fees. In addition, you will reduce any stress typically associated with the repossession process itself.
  • The fourth thing you can do is ask your friends and family members to help you pay the arrears.
  • The fifth step is to contact us to apply for debt counselling. This process is a legal process that will stop the repossession process in its tracks. The process will also provide you with a reduced monthly instalment to help you pay for the vehicle. The arrears amount will get restructured so that you can continue to repay the car with an approved reduced instalment with no arrears. We will cover the debt counselling process in detail below.

It is essential to avoid repossessions as much as possible. In other words, you must ensure that any deficits you owe get settled. You should also take the necessary steps to ensure that you do not fall behind with your payments so that you don't fall into arrears again.

Car repossessions How to avoid it infographic guide

What Happens During Car Repossessions?

Repossession occurs when a lender takes back the vehicle used as collateral for financing. South Africa's National Credit Act outlines the steps that need to happen to repossess a car legally.

  • Section 123 letter of demand. The process of repossession of a vehicle begins with a Section 123 letter of notice. Whenever the lending institution wishes to repossess a car, truck, or motorbike, they must send a letter of demand under section 123 of the National Credit Act outlining the amount owed.

It is required to send this letter by registered mail to the address outlined in the contract. To prove that the credit providers' letter of demand was delivered successfully, tracking information provided by the South African postal service will serve as proof.

  • Summons or voluntary surrender. You must understand that if you do not send an acceptable response to the letter of demand, the bank may take further legal action beginning with a summons. It is still possible for you to voluntarily surrender your vehicle before a summons from court is issued. Doing so will result in no further charges. Consumers can voluntarily relinquish their car under Section 127 of the National Credit Act to save themselves from additional legal fees. After surrendering your vehicle, you will have an additional ten days to decide whether you still want it. The bank will then sell the car at auction if you are no longer interested in it. If there is a shortfall in the sale, you will be held liable for paying the difference. On the other hand, if there is a surplus, the lender will refund you the difference.
  • Judgement from the high court. Upon receiving a default judgment, the bank or credit provider will have a warrant issued by the high court and sent to the sheriff. It is through this warrant that a vehicle can successfully get repossessed. The only person who has the authority to act on this warrant and take your car back is the sheriff.
  • Repossession of the car. The sheriff will arrive at the registered address of the defaulter and present the original warrant. Consumers do not have to sign anything as it is an order from the court and do not require their signature on any court documents. This default will now be listed on your credit profile, and you will be regarded as blacklisted

The sheriff will then seize the vehicle and tow it away for safe storage. If the consumer settles the total outstanding balance with any legal fees, the consumer still has the option of repossessing the vehicle. Nevertheless, if the consumer fails to make the full payment of the outstanding balance within the given period, the sheriff will auction the car. 

Prepare For Repossession.

There are three main reasons why people face car repossession. One reason is that they cannot afford to repay their loan. Another reason is that they have defaulted on their payments. And finally, they have been declared bankrupt.

What Should I Do After a Repossession?

As a result of the court's order, the sheriff now has the authority to collect your vehicle. It is helpful for consumers to know what to do during this stressful period of their lives. The repossession process isn't easy, and you may feel like you have no control over what happens next.

In the event of repossession of your car, you may be able to reduce the stress and anxiety resulting from the repossession by acting in advance. If you have fallen behind on your car payments and are worried it might be seized, plan to handle daily responsibilities. This plan must include both you and your family.

  • Personal belongings. Before your car gets repossessed, ensure that you have removed all personal belongings from the vehicle. In the event of a repossession, you will have difficulty retrieving your personal belongings forgotten in the car, and often, these items will be lost.
  • Don't be afraid to ask for help. Don't hesitate to talk to your family, friends, and Neighbour's - they may be able to assist. Ask them about their work schedules and responsibilities daily. Make them aware of the possibility of an emergency coming up where you may require their help.
  • Consider carpooling. You must build up a network of friends that you can call upon to help you out during times of need.
  • Grocery delivery services. You can sign up for apps that will deliver your groceries, and you can also contact your local pharmacy to find out if they will transport your monthly medicines to your residence.

Rebuilding your credit score and credit profile as soon as possible is essential after you have had your car repossessed. The default in your payment profile because of the repossession can remain on your credit report for up to five years, causing a big dent in your credit score.

Debt Counselling to Avoid Car Repossessions

The debt counselling program offers several ways to reduce your indebtedness, which in turn helps you to keep your car. It also makes it possible for you to repay any money owed to your creditors on time.

A consumer with too many financial obligations will find it challenging to repay their accounts. In this case, it is advisable to seek the advice of a debt counsellor to review their situation. Upon acceptance of your application for debt review, a debt counsellor will negotiate with your creditors a payment plan that you can afford.
As part of this financial restructuring process, all repossessions will stop. The benefits of this are that you would be spending less each month, but for a protracted period. As a result, you would incur less interest for a longer time. Considering that you will be spending less each month, you will be able to pay off your due accounts and keep your car. In addition, you will be able to pay for your monthly living expenses, such as food and transportation.

Know Your Rights.

If you are a person who is struggling with financial troubles, it can already be quite stressful for you. Due to the fear of losing an asset, such as a car, for non-payment, financial disaster certainly looms. Fortunately, debt counselling is an excellent way to protect your assets. If you choose to participate in the process, you will have the following rights.

  • It is every consumer's right to seek debt counselling services when faced with problems.
  • A consumer has the right to know why their application for debt counselling failed and got rejected.
  • The consumer has the right to receive a written disclosure of fees applicable before applying for debt counselling.
  • Before applying for debt counselling, consumers have a right to be fully informed about the process involved in debt counselling.
  • Every month, consumers have a right to receive distribution statements from their debt counsellors and payment distribution agents.

Start with an Initial Consultation.

One of the most effective ways to deal with financial problems and repossessions is through debt counselling. Debt counselling helps consumers to avoid repossessions as well as bankruptcies. However, it may not be suitable for everyone. It is crucial to talk to us before you get started, and we will explain the process in detail to you.

Understand the Process.

It's imperative to understand what's happening to you if you struggle with unmanageable debt. It is common for people who owe money to feel overwhelmed by the situation due to the enormous balances they owe. As a result, they can make bad decisions, such as taking out micro and payday loans that they cannot afford, which can end up leading to more problems.

We are here to help you through each step of the process and offer professional solutions like debt review that will assist you in managing your creditors and repossessions successfully.

Prepare for the Meeting.

Preparation is incredibly vital for in-person or telephone meetings. Make sure you have everything ready before you do the debt review consultation. If you have any documentation that will help you discuss your financial situation, please bring it with you.

Debt Counselling Fees - How Much Does It Cost?

Debt counselling is a good option for people struggling with financial problems. It helps you develop a plan to repay your creditors on time and avoid bankruptcy. The service is not free, and The National Credit Regulator strictly regulates debt counselling fees. The National Credit Regulator (NCR) released the Guidelines for Debt Counsellors in 2018. The following maximum charges are what a debt counsellor can charge:

  • An application fee of R50.
  • There is an administration fee of R300 per debt counselling application if the debt counsellor rejects your application because you are not eligible.
  • You and your creditors must agree on the repayment plan before a debt counsellor can charge the maximum fee of R8000 (plus VAT). In this case, the amount equals the amount of your first instalment as per your repayment plan. In other words, if your restructured instalment is three thousand rands, you will only pay R3000. You will need to pay this fee only ONCE.
  • The maximum fee for restructuring will be R9,000 (plus VAT) if the restructuring application is for both you and your spouse when you are married in a community of property marriage.
  • The debt counsellor must refund all fees you have paid if they cannot present a repayment plan to your creditors, the National Consumer Tribunal, or the Magistrate's Court within 60 business days of applying for debt review.
  • A monthly service fee of R450 (plus VAT) applies, equivalent to 5% of the monthly payment. Once you have received a clearance certificate stating that you have repaid all the debts for which you sought debt counselling, following which the aftercare fee will no longer apply.
  • You will incur a fee equal to 75% of the original restructuring fees if you withdraw from the restructuring process after your debt counsellor has prepared a repayment plan for you and successfully negotiated with your creditors.
  • If creditors refuse to agree to the repayment plan, you are responsible for any fees that the Debt Counsellor incurs.
  • The Debt Counsellor must disclose all fees to you upfront, and you must agree to the costs in writing.

When Should I Seek Help from A Professional Debt Counsellor?

As advised before, this process is not free, but the cost implication is modest compared to other financial relief measures. Use our debt review service to manage excessive balances that are difficult for you to handle. If you have pending car repossessions, then this restructuring can assist with a legal solution to prevent car repossessions and foreclosures.

Where Can I Go to Learn More About Debt Counselling?

There are different options available when it comes to dealing with loans and high outstanding balances. One option is to go through a debt counsellor who will work with you to find ways to reduce your monthly repayments. Another option is to take out a personal loan. This type of loan allows you to borrow money without needing to sell any assets. However, there are some disadvantages to taking out a personal loan. Interest rates, for example, are typically higher than those a debt counselor would charge.

Apply for debt counselling by clicking the photo below.

Easy online debt help application Credit Salvage

10 Reasons Why You Should Consider Debt Counselling

  1. Credit providers and lawyers will no longer call you demanding payment. If you are in debt counselling, all collection activity will cease.
  2. You will retain control of your assets during the restructuring process. The debt counsellor will seek a court order so that the restructuring plan negotiated with the creditor becomes legally binding as part of the debt counselling process. A credit provider, lawyer, or collection agency cannot repossess a home or car.
  3. Reduced interest rates. Reducing interest rates with credit providers is part of the restructuring plan. Due to the lower interest rates and charges, the consumer saves money. According to DCRS rules, credit cards, retail cards, personal loans, and microloans can decrease their interest rates to 3-5%.
  4. Choosing debt counselling instead of sequestration and administration. The primary benefit of this process is that it is a healthy alternative to sequestration and administration. It takes ten years to recover from sequestration, insolvencies, and administration. As an alternative to sequestration and administration, the National Credit implemented debt counselling. Overstretched consumers can now catch up on overdue accounts and still manage to cover living expenses effectively thanks to this Credit Act. The procedure is straightforward, quick, lawful, and effective.
  5. Debt review is flexible. If you come into some unexpected additional money during the month, you could pay off or increase the amount you contribute each month. It means that when things get tough, you can make lower monthly instalments and increase monthly contributions when things get better. Essentially, this allows this process to move forward faster.
  6. Simplified Process. TransUnion reports that there are currently 7 million credit card accounts in existence. At R216 billion, the total balance on credit cards indicates that there is still a strong demand for credit. Debt obligations multiply in a two-parent household, making it challenging to track household debts. The situation becomes even more complicated when the family income does not cover the monthly debt repayment. When this happens, deciding which creditors should get paid becomes more difficult. This process will be simplified by a debt counsellor who will ensure that all your creditors get paid. When you use Debt counselling, you will have only one payment to make, eliminating the need to send payments to several creditors.
  7. More effective financial habits. Debt counselling is the best solution for improving your financial habits. Personal finance skills are predominantly a behavioral issue. Once a debt review application is accepted, you will no longer have access to credit, so you will have to cover household expenses with your income or cash you might have rather than borrowing. Using cash for any purchase teaches people to save money. When this skill is acquired, one is well on their way to creating wealth
  8. You spend less on interest and more on capital management. The main advantage of debt review is that it lowers interest rates. When you pay your debt at a lower interest rate, you allocate more money toward the principal debt. Compared to making a payment arrangement without the assistance of a debt counsellor, the balance decreases much more quickly. Over the life of the debt, a reduced rate account can result in less interest owed.
  9. Easier negotiation with creditors. Debt counselling makes negotiating simple if you have many accounts to pay for all at once. An important goal of your debt counsellor is to decrease the minimum amount due to credit providers by extending the repayment period. Credit providers will reduce interest rates as the term increases or when the accounts get resolved in a certain period. We reduce interest rates so our customers can pay off their financial obligations more quickly and affordably.
  10. Debt counselling is 100% guaranteed. With us, you will get your financial obligations repaid cost-effectively, and your current financial situation will not worsen. By adhering to the restructured amount, you can ensure that payments get paid each month without skipping. Credit providers will terminate the debt counselling process if you miss a month.
Blacklisted

Blacklisted

Blacklisted, Credit reports and credit scores: what you need to know

Credit: What it is and how it works

In today's world, credit plays a crucial and significant role in enabling us to buy a wide range of things that one, in most cases, cannot afford to buy with cash. As a result, one can borrow funds from a bank or credit provider to purchase them. You then pay back the money you receive from the bank later, along with interest and some administrative fees. If your credit score is low and you have blacklisted matters, purchasing these goods on credit will be challenging.

There is no doubt that South Africans are heavily reliant on credit facilities for all aspects of their needs. Research has shown that South Africans are indebted to credit providers and banks to the extent that they owe trillions of rands. It is common for people to use credit facilities in today's world to help consumers afford many of life's more expensive assets, such as homes and cars.

It is important to note that the overall creditworthiness of your report, credit score, and how you manage your finances are all indicators of how well you manage your finances. Having a healthy credit report with favorable scores can prove invaluable when looking to improve your lifestyle. Because of this, you will be able to purchase items that you would, in most cases, must save for a long time to save up. These credit products include the following:

Similarly, if you have blacklisted matters, you won’t be able to finance high ticket purchases.

There are several types of credit agreements. Which ones should you be aware of?

As stipulated in the National Credit Act, a credit agreement can either be a credit transaction, a credit facility, a credit guarantee, or a combination of any or all the above mechanisms. As we examine the several types of credit available, we must note first that there are a few key differences between them, such as the repayment schedules and the repayment amounts.

Credit transactions are the process or event of receiving a loan or receiving a service in exchange for monthly repayments. In the meantime, interest and other charges will still apply until the agreed amount of the loan or service has been satisfied or repaid in full.

Here are a few examples of several types of credit agreements

  • Home Loan Agreements. Home loans are loans where money is advanced to the borrower to help them purchase a home. The house you want to buy will be the collateral for the home loan. The bank which approved the mortgage loan will then assign a mortgage bond over the property to the deed's office. This bond acts as security should the consumer fail to repay the home loan.
  • Instalment agreement. The term "instalment agreement" refers to a credit agreement in which the purchase price of movable property gets paid in instalments over time. Interest will still get charged on top of these instalments. It is imperative to understand that defaulting on instalment agreements will result in the repossession of these goods.
  • Credit agreement transaction. An agreement between two parties that is not a credit facility can act as a credit transaction. This agreement defers payment of an outstanding loan and charges interest for deferred payment. The concept of money lending covers all forms of money lending transactions, including monthly, one-time loans or even microloans.
  • Secured Loans. An example of a secured loan is when a person takes out a loan against their moveable property. The consumer then pledges to the lending institution a movable paid-up asset as security as part of the lending process. A paid-up vehicle is one example of a pledge in this regard.
  • Pawn transactions. As defined by the National Credit Act, a pawn transaction is an agreement in which a loan provider advances a loan to a consumer while at the same time taking possession of the goods provided by the consumer as collateral for the loan. When the consumer has repaid the loan in full, including interest, they receive their goods back.

Important Fact! Your credit report will typically provide you with information regarding the credit agreements above and how you manage the repayment of these monthly debt obligations. Credit agreements contain detailed information about your debts and repayment histories, which credit bureaus use when calculating a credit score. A credit agreement must be maintained, and monthly payments made on time each month for you to improve credit scores. If you fail to maintain monthly payments, you will be regarded as a blacklisted consumer and you will find it hard to open new credit facilities.

The importance of having a high credit score

In the sometimes-nerve-wracking process of obtaining financing, whether through a credit card or a loan facility, the credit provider uses your credit score to judge whether you are creditworthy. In other words, it is a measure of your likelihood of repaying this new debt successfully. You can also think of it as an indicator of how responsible you are with your finances.

You are less likely to default on your upcoming debt if your credit score is high. The higher your credit score, the more likely you will qualify for reduced monthly fees, lower interest rates, and more attractive credit card offers and rewards.

During the credit provider's assessment, they will consider your credit history along with your track record of how you are paying your accounts on time. In addition, they will consider how you deal with your debt in general. For many credit providers, evidence of a solid repayment history is vital. It is only with your permission or signed consent that credit providers will approach credit bureaus to access your credit reports and scores.

Not everyone in today's day and age needs credit facilities. However, a solid credit report could be beneficial if you intend to finance a major purchase like a car, tuition at an educational institution, a home, or any other high-ticket purchases that cannot be paid upfront using cash. Credit reports also play a significant role in many aspects of our lives, not just acquiring goods and assets. A credit report will play an instrumental factor when renting an apartment or applying for a new job.

Our blog post will provide you with an overview of some of the many connections between a credit report and credit score, consumer financial and paying habits, and how their impact can have on credit scores.

Blacklisted Build a good credit score

The Credit Report - What are they?

In your credit report, you can find an overview of how you have managed your debt and certain other financial obligations over the years. Credit reports will

Different consumer credit bureaus maintain credit reports. Creditors typically approach Experian, Compuscan, XDS, and TransUnion for credit reports. They compile information about debts and payments reported voluntarily by credit providers registered under the National Credit Act.

The information that the bureaus collect includes the following:

  • The total amount of debt that you have
  • Past or present credit accounts that you have opened
  • A history of how you have repaid your debts in the past 
  • if you have any delinquent accounts
  • Judgments on your record.
  • Debt review indicators
  • Administration orders
  • Sequestrations orders
  • Rehabilitation orders.

Credit Reports have the following various categories:

  1. Personal information. This information includes your full name, ID number, past and current employment histories, and current and past addresses. 
  2. Credit Score
  3. Public Records. Judgement information, default information, administration orders, sequestration and rehabilitation orders and debt review indicators
  4. Payment profile histories. All types of credit accounts such as credit cards, loans, vehicle financing, student loans, etc. This information includes the total amount of each loan, the outstanding balance on each account, the number of monthly payments made on each account, and the credit limit attached to each facility. Here you will see how you have made payments, whether they were late or on time. 
  5. Inquiries. The names and dates of the companies that have requested your credit report in connection with credit applications you made with that firm. While credit inquiries remain on your credit reports for two years, most credit scoring systems stop considering them after a year. 
  6. Deeds Office records. Records of any property you own will be reflected here.

Here is what you will not find in your credit report.

  1. Income
  2. Criminal records
  3. Bank Balances
  4. Medical histories
  5. Ethnicity / Race
  6. Marital Status
  7. Educational information. 
  8. Religion

Credit Scores

What is a Credit score?

Credit providers use a credit score to determine an individual's creditworthiness. It is a three-digit number between 0 and 710. The purpose of credit scores is to provide credit providers with tools they can use to make informed credit decisions. It includes approving or declining a consumer's request for credit.

Having a high credit score increases your likelihood of repaying your upcoming debts on time and within the terms of the agreement.

Credit scores are calculated based on the number of points assigned to each piece of relevant credit information. A credit score is created by adding the points. If you have a credit score that meets a certain level, your credit application will be pre-approved. It is also possible that your score would fall below a certain threshold, in which case your application for financing would not go through. A rejection from the bank based on a low credit score would make you a high-risk blacklisted consumer.

While your credit score is significant, it is only one of several pieces of information a credit provider will use to determine your creditworthiness. Another very crucial aspect of the lending process is affordability. In terms of the Credit Act, credit providers are obligated to do these affordability calculations to avoid reckless lending investigations.

Therefore, to successfully qualify for new credit facilities, it is imperative to focus on both aspects simultaneously.

Credit scores are determined by:

  • Credit report inquiry history over the last 24 months, including the number of inquiries within the last two weeks. Credit scoring models penalize excessive inquiries made in a brief period. Avoid applying for numerous credit facilities in a brief period.
  • Any adverse information. Some of the data comes from public records. Public records include judgments, sequestration orders, and rehabilitation orders.
  • Repayment histories. Your payment history includes any outstanding amounts owed and the monthly conduct of these accounts.
  • Debt to income and credit utilization ratios.
  • Good mixture of different credit agreements. A credit score reflects how much financial debt you have and the types of credit you have used up to that time. You can raise your credit score by taking out multiple forms of credit agreements. These include instalment loans, revolving credit, and home loans. Having a good credit mix can positively influence your credit score. If you have only one type of credit, such as payday loans, your credit score will reflect that as high-risk.
  • Evaluation of your credit history which includes the length of all credit histories.

If you investigate your credit scores, you will find a variety of several different credit scores. It is important to note that every credit bureau uses its scoring model, and credit providers only refer to one or two of them when making a credit decision.

Blacklisted. The top causes for being regarded as a blacklisted consumer.

  • High Credit Card Balances and Maxed Out Credit Cards. It is common knowledge that excessive maxed-out credit card debt has a negative impact on credit scores. In addition to paying the monthly instalment, consumers may not be aware that debt incurred through credit card use includes more than just the payment. Overusing or abusing credit cards and not paying the minimum instalment will negatively affect a credit score. These effects will cause you to appear as a blacklisted consumer.

By maxing out your credit cards, you will cause your profile to reflect a high credit utilization rate. The credit utilization rate increases if you have used an extremely high percentage of your available credit cards or store cards. This increase in your credit utilization will negatively impact your credit report.

As a result, high credit utilization indicates that, even if you still pay the minimum payments, you cannot repay the debt on your cards, making you at risk of default.

  • Filing for sequestration or Bankruptcy. It is common for people who are deeply in debt and perceived as being blacklisted to have no option but to declare bankruptcy, though that is the worst thing they could do to their credit score.
  • Adverse payment history. You will have an adverse credit record whenever you fail to make the monthly repayments on one or more of your credit agreements, which appears in your credit history. If a consumer has an adverse repayment history, it is unquestionably one of the most significant reasons a consumer may be classified as blacklisted. You can review your credit history, which is found on your credit report, to determine how you have managed your repayments in the past. A credit report will show you how many accounts you have and whether you pay your monthly obligations on time.

The impact of negative information on your credit score!

You may find that your credit score significantly drops if you have had adverse listings or adverse information on your credit report's payment history over the years. The amount of damage your credit score will suffer is dependent on the type of information in your credit report. Consequently, the score impact of these poor listings diminishes with time, but they can still overpower other positive factors and harm your score.

There are several adverse listings and information which affect credit scores. Examples include the following:

  • Debt review listings and debt counselling listings! Your credit report will display the status of debt counselling until the debt counsellor issues a clearance certificate.
  • Court judgments. The term "court judgment" refers to the procedure when a court issues an order to a consumer to pay a debt. These judgments will remain on your credit reports for up to five years. If you pay the total amount owed before the five years, the judgment information falls from your credit report. According to the National Credit Act, credit bureaus must remove judgment information when the credit providers send them a payment confirmation letter or when they receive a court order rescinding the judgment.
  • Default listings. Default listings are the result of a credit provider's enforcement action. Using a letter of final demand is an example of the action against you by the credit provider to force you to pay for your account. That information will remain on your credit report for one year and reflects within the defaults section. These listings have serious detrimental effects on credit scores. You will be able to remove the information from your credit report sooner than the one-year retention period. You need only pay the outstanding amount. According to the National Credit Act, credit bureaus must remove enforcement action default information when the credit providers send them a payment confirmation letter.
  • Administration. A person under administration will have their monthly instalments reduced and their payments extended if their overall debt does not exceed a threshold of R50k. Administration orders remain on your credit report for five years or until cancelled or rescinded.
  • Sequestration and rehabilitation court orders. It is impossible to remove a sequestration order from your credit report, so it remains on your credit report for five years. A rehabilitation order will have an additional five-year impact on your credit report after the rehabilitation order is in place.
  • Trace Alerts. A trace alert is an instrument that appears on your credit report and is placed there by your creditor. Since the credit provider could not reach you, they have asked to receive a notification whenever your contact information changes. After the updated information is uploaded, the credit provider will instruct the bureaus to remove the trace alert.

Management of credit reports and scores!

The number one thing you can do to improve your blacklisting status and credit score is to review your credit report often. Review your credit bureau report at least four times a year between each of the different credit bureaus in South Africa.

It is also a sensible idea to review your credit report once a month for three months before you plan to make large purchases. For example, this includes buying a home, purchasing a vehicle, or taking out a personal loan of more than R150 000. By doing so, you will be able to avoid unpleasant surprises when it comes time to apply, and you will find that you will be able to correct any adverse information from the bureaus before applying.

Avoid getting blacklisted by managing your credit report and score.

Since we have gone over the factors that can influence your credit report and your credit score, you may be able to make choices that can help improve your credit scores with all the different credit bureaus. Take the following steps to improve your credit score and avoid getting blacklisted:

Keep accounts with a clean history open.

A smart strategy is to keep unused credit and store cards open. The closing of any credit or store cards on which you have an outstanding balance will increase your utilization ratio. In turn, this will harm your credit score and you will be deemed blacklisted. Maintaining an active account by using the card regularly for small purchases and paying them off right away is also an effective way to improve your credit score.

Make sure you pay all your due accounts on time without fail.

Many credit scoring models use a stable repayment history as the main factor when calculating your three-digit credit score. As a result, it is safe to say that your payment history is the most significant determinant of your credit score. Your payment history can boost your credit score if you maintain the following:

  • Keep your payments on time every month.
  • Don't miss a payment, even if you are disputing the account. After the dispute has played out, you can always request a refund. That will avoid missed payments in your report.
  • If you cannot afford the current outstanding amount, make at least a minimum payment.

Reduce your revolving debt by paying it off.

As a result, you will be able to improve your credit utilization ratio, and the lower you can get it, the better off you will be in your quest to avoid being classified as blacklisted.

According to research, consumers who score the highest credit scores tend to keep their credit utilization levels between ten and fifteen per cent.

Be conservative in your use of credit.

Do not go beyond the limit approved by your lender. If you have a revolving or credit card with an R10 000 limit, try not to go over that limit. When you exceed the credit limit on these accounts, it will negatively affect your credit score. Ensure that you do not exceed fifty per cent of the credit limit on these accounts. Having a higher credit limit and using less of it each month will decrease debt to income ratios and improve credit scores.

It is best not to apply for new credit unless you really need it.

Our goal is to help you avoid or at the very least minimize the slight drop in your credit score that can sometimes result from inquiries.

Make sure that your credit report is free of fraud or inaccuracies.

One way to get rid of a blacklisted status is to consistently check your credit reports. If your credit reports contain false or inaccurate information, this will negatively affect your credit score. As a result, your credit score will suffer. Because of this, you should monitor your credit report on all four major credit bureaus (Compuscan, Experian, TransUnion, and XDS) for any fraudulent or incorrect information and accounts that could affect your credit score. Please check to ensure that the creditors listed on your credit reports are correct. If you discover any errors on these credit reports, please submit a dispute to have the information corrected immediately.

Ensure you have a diverse credit mixture.

If you have only one type of credit line on your credit report, such as a payday loan, your credit score may suffer. Having a diverse mix of credit products may help you boost your credit score. However, you need to make sure that you can repay any new facilities you make. In other words, if you take on too much debt, you could hurt your credit score overall.

Conclusion

As a result of all the problems that are associated with credit scoring, credit reports, blacklisted matters, and blacklisting issues, it's understandable that some consumers think the algorithm used to determine credit scores may be flawed.

There is no doubt that credit is a necessity in today's world. Most consumers cannot afford to pay cash for their cars, and even fewer can afford to invest money upfront for their dream homes. Credit facilities can be a tool to start a new business venture or even help finance an expensive higher education. If you follow our advice in this article, you will be able to make the most of your approved credit facilities. Credit has the potential to enhance lives when it is used and managed well. Sadly, improper use and abuse of credit facilities can lead to blacklisting.

To obtain credit facilities that are likely to enhance our lives, we must understand how credit scoring, credit reports, and blacklisting work. By applying the knowledge that we have provided you with in this post, you can take control of your financial life today and avoid getting blacklisted by your creditors.

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How to get out of debt

How to get out of debt

How to Get Out of Debt

How to Get Out of Debt guide. Approximately 75 per cent of South Africans' take-home pay goes to paying off their debt, according to a report by Business Tech. I don't know if you can imagine that there can be anything more frustrating than watching your paycheck disappear faster than you can earn it. Anxiety about feeling like you are at the helm of a ship headed for disaster.

There is nothing more aggravating than being hit in the gut every time your account payment due date rolls around. Your calendar seems cluttered with only payment dates rather than holiday dates. Regardless of what you do or where you go, it feels as if your finances won't ever be stable.

You probably would like to know how to get out of debt if this scenario seems too familiar. Fortunately for you, we're about to tell you exactly how you can pay off your debt and reclaim your financial freedom. Just keep reading to find out exactly how you can do it.

Here's Why You Should Reduce Your Debts ASAP

Experts in personal finance have a reputation for telling consumers that they need to start paying off their debts as fast as possible. However, is it the best plan for the future to rush to become debt-free as soon as possible? The following are three reasons why South Africans need to confront their debts head-on:

1. To Pursue More Fulfilling Career Options

Approximately 47 per cent of South African professionals in a 2019 survey stated that they were applying for new jobs in the hope of leaving their current employers. In the ideal world, most people would like to be able to move on from their current positions with an offer in hand. However, what happens if that isn't possible?

The Old Mutual Savings and Investment Monitor's 2021 report might provide further insight into this situation. According to the numbers, a high proportion of people surveyed didn't have enough savings to make it through a month without a job or without the support of their family members.

So, here's the bottom line:

When you are spending most of your monthly income on debt and expenses, you cannot always be true to your heart when it comes to your job. You will be able to choose what type of work environment you would like to work in once you have paid off your debts and have a substantial nest egg in the bank.

2. To Lower Stress Levels

The problem with debt is that it acts as the main villain in a horror movie. One day, you find yourself living the life of your dreams and happily purchasing items on credit. The next thing you know, your credit card debt is out of control, and you are up all hours of the night worrying about it.

The National Treasury reported that 56 per cent of respondents in South Africa described their financial stress as "high and overwhelming" in 2021. There is no doubt that there would be a significant reduction in their stress levels associated with money issues if any of those individuals could wake up tomorrow debt-free.

3. To Pursue Future Plans

The ability to pay off your debts indefinitely is fantastic provided you have a steady income stream. However, imagine you are retired, and your income stops coming in. What then? As reported by 10X Investments in their South African Retirement Reality Report for 2020, the results were not encouraging:

The survey found that 49 per cent of respondents did not have a retirement plan. Only thirty per cent of respondents were able to state they "felt confident" about their retirement strategy. Just six per cent of those surveyed believed that they would be able to retire comfortably in the future.

Even though debt payments may seem like a small matter, you cannot underestimate the toll that debt payments will have on your savings. Consider what it would be like if you could contribute 10 per cent or 15 per cent more to your pension each month. Once you have reached retirement age, these benefits will amount to more than you contributed.

This is How to Get Out of Debt!

Okay. You have been reading along so far and nodding your head as you go.

Stress has no place in your life. What you want is more mobility in your professional life. Moreover, one of the most significant factors is that you want your retirement years to be the most enjoyable of your life.

What are the steps you need to take to get out of debt? Here is a step-by-step guide that will help answer any questions you need to have answered.

1. Calculate How Much You Owe.

A general estimate is certainly not going to suffice when it comes to managing debt, and that is why you should only rely on specific figures. It is not difficult to guess how many cups of coffee your office consumes every morning. It is also not difficult to determine how many snacks you munched on last week.
On the other hand, if you want to talk about how much money you owe your creditors, make sure the numbers are specific. In addition to that, once you've tallied everything up, the investigation can't end there.

For example, do you have any debts with high-interest rates? And if you do, do you have multiple revolving credit lines? Do you have any obligations that are subject to strict repayment schedules? If you were to take on a complicated project at work, you wouldn't do so without understanding how you would approach it first. Otherwise, you may find that you are wasting your company's time by overestimating the work. The overestimation of a project can lead to subpar deliverables, resulting in a furious boss when things don't go as planned. Making regular payments is often the key to getting out of debt. Make sure you execute your strategy carefully using a metaphorical and literal approach and be sure you have a firm grasp of the situation.

2. Create a Debt Repayment Plan.

This takes you to a point where you have the numbers in front of you, and you are ready to go. You even have a spreadsheet that allows you to dive right into the numbers with just one click. So now, the million-Rand question is: How do you do it? Are you more of a fan of snowballs or avalanches? If you go skiing, you're going to prefer snowballs — and it's not even close. However, when you are working towards getting out of debt, the "right" decision might not be as clear-cut as one might think.

When you use the snowball method, you first start with the smallest debt and then work your way up to the highest balance you owe. If you, do it this way, you will "snowball" your debt repayments until you have paid off every one of them. By following the avalanche strategy, you can also focus your efforts on one debt at a time. However, instead of focusing on the totals, you'll concentrate on the debts with the highest interest rate. Choosing the snowball method will enable you to achieve a lot of quick wins. However, by using the avalanche strategy, you will be able to save more money on interest over the long term.

The two methods are both well-established. It is a safe bet that both strategies will work. Choosing a technique that you can stick with is crucial.

How to get out of debt Credit Salvage

3. Look for Ways to Cut Costs.

Often, this is the point where many debt repayment plans veer off the rails. It is possible to take steps on your journey to financial freedom that include calculating costs and picking a debt repayment strategy - but all of that is theoretical. From this point forward, things are about to become a reality. In the same way, as an exhausted soccer team pushes its limits in a championship game, you will have to evaluate your budget and figure out how to find more money to pay off your debts.

It may have become a long-standing habit in your life to eat out with your friends after work for years. It could also be that you tend to make one-off purchases without tracking what you are spending. You will find plenty of ways to reduce your monthly costs if you do not leave any stone unturned. It is imperative to keep in mind that you don't want to take your cost-saving measures too far. Stanford University's marshmallow experiment from the 1970s did more than merely reveal that children like to get their treats as soon as they can. In addition, the study indicated that not thinking about immediate rewards is often a crucial ingredient for delaying gratification for many people.

While everyone wants to know how to get out of debt quickly, becoming debt-free is a goal you must strive towards if you wish to eliminate your debt. The next time you are looking for ways to reduce your budget, you should look for cost-saving measures that don't feel like significant sacrifices when you are working through your budget. There is a noticeable difference between buying generic goods instead of designer items or eating veggie-heavy lunches instead of meat-filled ones.

4. Make More Money.

A strategy to get rid of debt does not have to involve scraping by and living below or within your means to pay it off. Getting from your debt problem to a debt-free situation is expedited by making more money.

As we mentioned in one of our articles, we describe how blacklisted consumers can claw their way out of debt by understanding how blacklisting works. A list of money-generating ideas, including selling unused items and starting a business, was provided in the article. However, even if you are not a digital entrepreneur, you may still be able to find casual work that you can enjoy making more money.

Working an additional eight hours at the weekend or taking on a few extra overtime hours might not have a significant impact right away on your bottom line. However, you have managed to take a considerable chunk out of your debt over the past year.

You might want to give it some thought.

5. Create a Long-Term Financial Plan.

Most debt problems fall into one of two categories:

  • Problems with spending
  • Money and problems with earning money

You should take steps to address the root cause of your debt problem as soon as possible. No matter the circumstances that lead you to search phrases like "How to get out of debt fast" Why? It is highly likely that you will find yourself in the same situation if you do not take the time to reflect on your finances and establish new rules going forward.

Consider your retirement plans and create a budget that is sustainable. After the debts have been settled in full, you will have the skills and knowledge necessary to achieve the financial goals you have set for yourself in record time.

Still Not Sure How to Get Out of Debt?

Our discussion on reducing debt may have just covered the basics. Nevertheless, sometimes a guide that tells you how to get out of debt is not enough.

It is something that we fully understand and appreciate.

There is no need to feel alone in your situation if you cannot repay your debts. By using our debt counselling services, you will be able to convince your creditors to accept less than what you owe them.

What do you say? Does that sound reasonable to you? Let us reduce your debt as soon as possible. For more information about our debt counselling services, please click the link below. You may also contact us and ask about our credit clearance and debt review cancellation services.

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Sequestration alternatives

Sequestration alternatives

Sequestration alternatives: 6 effective alternatives.

Would you believe there is an estimated 1.5 million individuals in the world applying for bankruptcy every year? That is a staggering number! There are increasing numbers of consumers in South Africa who are turning to sequestration to resolve substantial amounts of debt that they are facing. There are alternative methods of dealing with debt in ways that do not involve bankruptcy or sequestration.

A large amount of overdue debt will harm your life in many ways, and it affects far more people than you might expect. It is often the result of circumstances beyond their control that lead them to fall into debt. There are many reasons for this, such as divorce, illnesses, disabilities, hospitalizations, or even retrenchments.

When you have excessive debts, you may have no choice but to consider filing for sequestration, insolvency, or bankruptcy. Depending on the circumstances in which you find yourself, sequestration may not be the best course of action. It is imperative to recognize that applying for sequestration or declaring bankruptcy and insolvency will severely damage your creditworthiness, credit report and credit score. Sequestration and rehabilitation orders remain on your credit report for ten years.

Sequestration what is it?

To apply for sequestration, an applicant must file an application with the court to be declared bankrupt or insolvent. Additionally, with the help of their attorneys, creditors can request that a court declare a debtor bankrupt by filing a petition with the court.

Many believe that bankruptcy is unavoidable, but the truth is there is a large variety of different alternatives to be considered.

So, what are the sequestration alternatives to filing for bankruptcy? Keep reading to learn about your six best options.

1. Selling Assets

One of the easiest ways to repay your debts without declaring bankruptcy or insolvency is liquidating some of your possessions with value. Selling some of your possessions may enable you to pay off some or all your debts, giving you a breath of fresh air.

Due to consumer attachment to their possessions, this option of selling their assets rarely occurs. Liquidating valuables may allow you to reduce your debt or even eliminate these lingering obligations. Nonetheless, you should be aware that there are, unfortunately, several downsides to this strategy if you decide to take the first step in trying to sell some of these possessions.

As a first step, it would be advisable to evaluate your assets that aren't necessary to your daily life and get rid of them. Your home is one of the most valuable assets that you need in addition to a car for commuting to work. Besides those two essential assets, you can sell everything else that you own to reduce your debt. 

The second concern is that if you sell your non-essential assets in a hurry, you might not be able to get the appropriate value for them. It is imperative to note that the act of liquidating your assets might help you pay off some of your debts. But you should be aware that it can also have an adverse impact on your future financial future. As this is not the preferred option for all people, if you have numerous or valuable assets, you can get the head start you need to deal with your debt and avoid the consequences of declaring bankruptcy or insolvency.

If you are thinking of going this route, then one thing you should do is list your necessary and non-essential assets. It goes without saying that you should make sure that you liquidate everything on your non-essential assets list. In addition, do not forget that you can always replace all the items on your non-essential list once your financial situation improves in the future.

2. Budgeting

The process of repaying debt is not an easy one. First and foremost, you should consider whether you can pay off your debts. To answer this question, you must first create your own budget. As a result, you will know how much money you have available to repay your debt monthly.

When you are trying to avoid bankruptcy or insolvency and strive to achieve financial independence, it is imperative that you establish a budget to set aside money to pay your accounts and debt. Making a list of what you need and what you want to do is the first step in this process. Consider prioritizing things like food and account payments, and it is also a sensible idea to limit impulse buying. If you want to figure out how long it will take to pay off all your financial obligations, you should first compile a list of your monthly payments, including the balances you owe.

The sooner you learn how to budget your finances, the closer you will be to financial freedom. There is no doubt that it will be a daunting task, to begin with, especially if you've never had a strict budget before. There will be challenges along the way, and you'll want to walk away from them, but if you stick with them, you won't regret it.

When you are facing the possibility of going insolvent, the problem may not be a lack of financial capacity but instead learning how to use your resources more effectively. You may also want to consider debt counselling and debt review as part of the solution. The Account Repayment template we have created should make this a simple and straightforward process for you. This document will give you a general idea of how much money you need to set aside every month to pay off your debt in one to five years.

If you find through this analysis that you will not be able to repay all your debts within a maximum of 5 years, at which point we would suggest debt counselling with a reduced interest rate and reduced monthly payments.

Sequestration Alternatives 6 effective

3. Side Income as Sequestration alternatives

A more obvious solution to avoid bankruptcy is to increase your income, but what are some ways to do this?

Side hustle is a remarkable thing to invest in to avoid bankruptcy and sequestration. Then, of course, there are your typical methods of getting a part-time job to help supplement your primary source of income. However, other modern solutions are available, too.

With access to the internet, there are an unlimited number of opportunities. Finding freelance work doing something you are skilled at or passionate about may be the boost you need. Freelance work is flexible, and you can schedule it around your primary employment; in many cases, freelance work can be so profitable that it can entirely replace your 9-5 job.

Get started and start earning a side income today! Select a side hustle from the list below, and you will be able to supplement your income with the extra income.

  • Online tutoring is proving to be increasingly popular.
  • Consider joining focus groups or taking part in paid surveys.
  • If you have a spare bedroom or a garden cottage, you could rent it out.
  • Provide babysitting services.
  • Becoming a freelance writer or proof-reader can be extremely rewarding.
  • Provide grocery delivery services.
  • Bake goods and sell them at your local home industry shops.
  • Drive for Bolt or Uber and make money from it.
  • For those consumers interested in delivering food to customers as an extra source of income, you can join Mr. Delivery or Uber Eats.
  • Get into the world of photography as a side income stream.

The above-mentioned incomes will assist you in your quest for sequestration alternatives

4. Using Available Equity in bond as sequestration alternatives

If you own a home, there is a strong chance that you took out a home loan to purchase it. Due to this, your home loan payment every month is one of the biggest, if not the biggest, monthly expenditures you make.

When you own your home and have positive equity in your property - meaning that the value of your home is higher than your remaining outstanding bond - you may be able to take out a home equity loan or refinance the house. The money you will receive will allow you to pay off most of your unsecured debts.

If debt problems negatively impact your credit score, banks will be willing to work with you. Consequently, the bank's loan is provided under the condition that it settles all unsecured debt. The bank will pay these debts before transferring any available balance to you.

When you refinance your home, you will be able to apply for a new loan that could come with a lower interest rate than the one you had when you bought your house. It is a sensible option to investigate whether your finances are stable or not; it can save you a lot in interest payments and can be an effective tool for one of the Sequestration alternatives. 

5. Friends and Family

Don't be afraid to ask your loved ones for help if worse comes to worse. However, only consider this option as a last resort, especially if the one you ask for is financially stable.

Using this option should be your last option because it has many disadvantages. Asking friends and family for a loan can put them into financial hardship, and worse, it can ruin your relationship with them.

When you come to this decision, ensure that every agreement is on paper. Also, treat this as a loan from a bank, don't think you can miss payments because they are loved ones.

Debt Counselling sequestration alternative

6. Debt Counselling and debt review as sequestration alternatives. 

A professional debt counselling company like Credit Salvage, which provides debt counselling services, may be able to bring clarity to your finances when you are feeling overwhelmed with your debt.

The debt counsellor can review your financial situation and assist you in creating a realistic budget. In addition, a debt management specialist can help you renegotiate substantially reduced interest rates with your creditors as part of your debt management arrangement.

The most effective solution before applying for sequestration is to seek debt counselling. You should seriously think about this option before considering an insolvency solution.

The goal of debt management and debt counselling is to help you get rid of your debts within a two-to-five-year period. As a first step, your debt counsellor negotiates with your creditors so that you receive a lower monthly payment and interest rate. You opt-in for a monthly payment plan in which you make a single reduced lump-sum payment to the debt counselling company's Payment distribution agent, which then distributes the payments to your creditors.

Conclusion: What are the sequestration alternatives

To avoid sequestration, you should look for ways to make more money and spend less while negotiating with your creditors and managing your debt with the help of a debt counselling company. You can use several different strategies to gain control of your debts and pay them off without resorting to reaching out to the courts for sequestration assistance. You will be able to avoid having a sequestration court order appear on your credit report and be free from all your debts if you are successful.

There are several reasons why it is imperative that if you ultimately decide to apply for sequestration, you take the time to learn as much as you can about how it works. You need to be able to make your decision after considering all your options. Do not worry about the short-term effects on your credit report, credit score and creditworthiness. Instead, make it a priority to get out of debt as soon as possible. As soon as you are debt-free, you can begin working towards rebuilding your creditworthiness.

The possibility of bankruptcy can be scary, but now we've answered the question, " Sequestration alternatives: 6 effective alternatives." If you are interested in learning more, check out our debt counselling and credit clearance services!

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