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Debt Management Company: Can They Really Get You Out of Debt?

Debt Management Company: Can They Really Get You Out of Debt?

 

Managing your finances can be difficult even in the best of times. The debt-to-income ratio of households in South Africa has increased from 72% in 2017 and 2018 to more than 77% in 2020.

With debt on the rise, there is an increasing number of people interested in using the services of a quality debt management company. On the other hand, some people struggle with their finances without knowing what debt management companies can do.

So, what exactly are the advantages that these financial management companies can provide? Read on to learn all about what these management companies do and if they can really help you get out of a financial mess!

Debt Management Plans: what do they involve?

You can get into debt quickly, but it can take a long time to pay it off. It is possible to manage it. Several firms provide debt counselling to help those struggling to make their monthly payments. One way to deal with your finances is through a debt management plan. A debt counselling process allows you to manage your loans and let you pay them off at reduced installments at reduced interest rates. So, a debt management plan is an agreement between you and your creditors in which you commit to paying off all your commitments in reduced installments at reduced interest rates. The process is also called the debt counselling or debt review process. 

Typically, this solution occurs in either of the following circumstances:

  • As your living expenses change, you can only afford to pay a small amount to your creditors each month. 
  • Despite your financial difficulties, your creditors can still receive payment, even if it is through reduced repayments. 

Companies that manage debts can assist for a fee. Alternatively, you can negotiate your own payment plan with your creditors, but you will not get protection under the National Credit Act. If you do opt to use a debt review company to manage your finances, loans, and credit cards:

  • You will make regular payments to the debt counsellors, Payment Distribution Agent (PDA).
  • Your Payment Distribution Agent (PDA) distributes the money among your creditors according to your repayment proposal.
  • Once you receive your repayment statement, you'll know who has received what payment and the current balance after distribution.

Debt Management Services Can Simplify Your Financial Situation. 

When you're dealing with multiple creditors at once, managing sufficient payments to credit providers can seem impossible. Every creditor has its own deadlines and calculates minimum payments differently. Keeping track of everything can become impossible in certain instances. A debt management company determines how much you can afford to pay your creditors after paying for all your reasonable living expenses, such as groceries and household expenses. The Payment Distribution company usually pays your creditors on your behalf, keeping track of the amount you have already paid back as well as what you still owe.

An essential benefit of using debt management companies is its ability to help solve any unmanageable financial situation. You can usually simplify all your accounts down to a single overall balance with their assistance.

On top of that, you will only have to make a single reduced repayment each month. Beyond that, you can forget about all your loans, credit cards and clothing accounts and let the National Credit Act imposed system carry you through the long journey to freedom from debt.

Debt Management Company. Can They help?

A Good Debt Management Program Can Help Your Credit Score

Fundamentally, a credit score is a way for credit providers to measure how likely somebody is to repay their debts. The more accounts you get into and the less you pay back on these accounts, the lower your score gets. It makes sense since future credit providers will examine your history of paying back your accounts on time. 

However, not everybody reaches out to a debt management company to manage their financial problems. The track record of over-indebted consumers working with debt management companies is better than most when tasked with managing their unmanageable financial situation. As a result, there is a good chance that your credit score will not drop as much.

Reaching out to a registered company will show that you are doing everything you can to take care of your obligations.

To take advantage of all the benefits that debt review offers, you must make payments every month without fail. 

You must make monthly payments without fail to secure the benefits of your debt management plan, such as reduced interest rates and renegotiated lower monthly payments.

Taking advantage of these benefits will not be possible if you fail to make your restructured instalment. The debt management plans under the debt review program are for those devoted to financial change and who intend to maintain monthly payments without fail.

What accounts or obligations will I not be able to pay off with a Debt Management Plan?

It is not probable to use a debt review Debt Management Plan to pay off the following. 

  • Pay as you earn and regular Income taxes due to the South African Revenue Services. 
  • TV License
  • Property Taxes
  • Electricity accounts
  • Maintenance and child support court orders
  • Cellphone accounts
  • Any legal accounts for which legal action has been initiated against you before you applied for debt review. 

 

Why hire a credit bureau clearance company or Debt Management Plan

A Decent Debt Management Plan Will Forbid You Taking on More accounts.

Using a debt management company can help, but it will also require you to start making different financial choices. Your new restructured financial will require that you stop taking and applying for any new credit agreements.

If you are used to taking on increased debt all the time, this can require a significant adjustment. However, it is for the sake of your future financial health.

Your Debt Management Ratio Will Take Time to Adjust

Your new restructured financial plan that a debt counsellor will prepare for you will have a beginning and an end. If you follow the debt review process, you will eventually get through to the end of your financial woes.

However, in the meanwhile, you will have to make sure to keep making payments. You'll have to trust the system to get you through tough times.

While progress may seem slow at first, it will eventually pick up speed. If you follow the simple plan that a good debt management service will create for you, your debt management ratio will progressively adjust, your credit score will improve, and you will become debt-free.

Debt Management Services Can Help You Lower Your Interest Rates

Debt-review companies do so much more than simply providing you with sound advice and a simple plan. They can also help make it so that you do not have to pay as much money back to your creditors. They will start by negotiating with all your creditors and finding any way they can to lower your interest rates.

In most cases, they will have remarkable success. The total amount of money you will have to pay each month will not only be simpler, but it will also be smaller.

Debt Management Companies Can Help You Eliminate Extra Fees

On top of that, a good company may be able to negotiate so that you do not have to pay some of the extra fees that often come with financial agreements. Among these fees are late charges and management fees.

One of the primary ways a debt management service can help you reduce the total amount you need to repay is by lowering your interest rates.

Debt Management Can Help You Avoid Bankruptcy

With appropriate debt counselling, you can avoid the prospect of insolvency and sequestration. That can save a sizable portion of your property and your credit score as well. At the same time, if you ever want the ability to declare personal bankruptcy, later, having a debt management plan in place will not interfere with your ability to do so.

In other words, you can avoid insolvency if you want, but you can also use it later if you choose to do so.

Has your Debt Management Company closed?

In the past few years, several debt-review management firms have closed due to noncompliance with rules mandated by the National Credit Act and enforced by the National Credit Regulator. 

If the company you chose to manage your accounts for has closed, we can help. 

Find out how a Debt Management Plan can help you with your financial situation.

If you are thinking about using a debt management plan for dealing with your debts, it is always best to speak to an experienced debt counsellor. The debt counsellor might find that this debt solution is not the best fit for your needs, and they will suggest better alternatives for you to consider.  You might be able to become debt-free sooner than you expected with the help of debt counsellors and debt advisors.

A debt counsellor will:

  • ensure confidentiality is guaranteed
  • will not judge you in any way or hold your financial situation against you. 
  • be able to assess your debts and recommend ways to deal with them that you may not even know exist.
  • Always make sure you are comfortable with your decision before the company begins reviewing your debt.

Many over-indebted consumers who receive debt advice from a qualified debt counsellor feel more in control of their finances afterwards.

Your Debt Management Company will assist you with the following to deal with your debt. 

A debt counsellor will tell you exactly who you owe money to, and the total balance owed.

  • Organizing your finances is one of the first steps a debt counsellor will take if you find yourself overwhelmed by debt. In consultation with your debt counsellor, you'll learn exactly how much you owe to whom. Your debt management company will keep you informed throughout the debt relief process with a listing of all your debts, including creditors, amounts and due dates.

Your debt counsellor will assist you in mapping out a monthly budget.

  • Budgeting helps you see where your money is coming from and where it is going. The debt management company will assist with this process to let you know how much you can afford to pay back monthly and what your monthly restructured instalment will be.

paying off expensive debts first

  • The debt counsellor will prioritize your list of debts. Your most expensive debts are dealt with first by credit management companies using complicated systems. You will save a lot of money eventually if you pay off your accounts in the correct order, but you'll find relief in the fact that you are paying for them.
  • Debt management firms prioritize resolving those debts whose interest rates are the highest or those that cost you the most.

Restructured instalment

  • The ideal situation is to pay a little more than the renegotiated restructured instalment every month - this will reduce your debt faster. Ensure that you make at least the minimum restructured payment each month to prevent your debt from growing.
  • The moment you miss your monthly restructured payment, you may have difficulties catching up on your arrears. If you fail to make a payment even for one month, your account will go into default, and your creditors will terminate the debt review process, which can result in severe consequences.

Don't make impulsive or irrational purchases

  • As soon as you receive your salary, make your monthly restructured payment for your debts. 
  • Prepare a strategy to avoid impulsive spending by understanding what triggers your impulses. Plan how much you will spend on your monthly groceries in advance to ensure you don't end up overspending or get tempted to visit other stores for unnecessary spending.

Enjoy All of the Benefits of a Quality Debt Management Company.

From this article on some of the main benefits of working with a reputable debt-review management company, we hope that you have taken away something helpful. Finding the right company to work with can take some time but doing so is an investment in your future. Our certified counsellor can help you determine if this management plan is appropriate for your situation. The appointment is free, and our counsellors are readily available to discuss your situation online until 8 p.m. every day, Monday until Sunday. 

Feel free to contact us here at any time if you would like to learn more about what a debt management company can do for you or if our debt review process is appropriate for you!

Sources - Other good reads

 credit clearance header

Things You Must Know about a good or poor payment profile History.

Payment Profile History - 13 things you must know.

Missing or paying an instalment late can affect your credit score. You will hurt your credit score if you miss one or two payments since on-time payments have the most impact. In the case of a perfect credit report with impeccable payment history, a late or missed payment can significantly lower your bureau report score.

There are times when it is difficult to pay a debt on time due to challenging economic conditions. It is challenging to pay off debts when you lose your job or face another financial crisis. The moment you find yourself facing hardship or a financial crisis, seek help immediately. This article provides answers to several questions about managing debt with debt review. You will learn how to deal with unmanageable debt from this article.

We will discuss some general terms so that you get a better understanding of all the jargon.

What is a poor payment profile?

Payment profiles contain a record of repayments on one or more of your bond accounts, vehicle finance agreements, credit cards, and loans. Poor repayment profiles will reflect negatively on a consumer's report. If a consumer does not pay or does not pay in full their debt before the due date, their score will be adversely affected. Those with a poor repayment profile are likely to have low scores and therefore be considered high-risk borrowers. Poor pay history in South Africa will make getting new facilities more difficult.

How important are my payment profile and credit history?

Whether you have a home mortgage, vehicle finance, credit-card, personal loan or even a simple clothing account, your history shows your ability to repay debts. Maintaining a good repayment profile and history shows lenders that you would have the means to make your future instalment payments on time.

Similarly, you will demonstrate to prospective creditors that you will struggle to service the new facility satisfactorily if you have a poor repayment profile.

Credit payment profile History infographic illustration

Who creates my payment profiles or payment histories?

All registered creditor providers, service providers like cell phone companies and banks report your monthly repayments to the four major bureaus. These bureaus include Compuscan, Experian, TransUnion, and XDS, and the reports they receive indicate whether your monthly payments were paid on time, late, or missed. In simple terms, a repayment history profile with a lender is built month by month over some time. The bureaus then use this data to create a creditor specific payment history profile. Your payment behavior depends on whether you have a good payment history profile or a poor payment history profile.

Your payment behavior will be reported to the four major bureaus by all NCR registered lenders. When you find yourself unable to make any payments for a month, seeking help is key to building a good payment history profile.

Amongst the lenders who report this information monthly are banks, credit providers, furniture financial providers, payday loan lenders, and stores where you have revolving facilities.

A judgment against you for not honouring an agreement, being placed under sequestration, or having your salary garnished by a court can appear under public records/collections on your bureau report. Moreover, bureaus receive monthly public records, such as court and property records, to get a complete picture of your finances.

When is a payment marked late on bureau reports?

Registered NCR lenders and banks expect you to repay them what you borrowed from them. Your bureau score heavily depends on your repayment history profiles which is the history of how many on-time payments you have made on your facilities. Poor payment history of delinquent payments will result in a poor repayment profile, which will negatively affect your bureau scores.

Under the national credit act, payments are only reported to bureaus if they are at least 30 days past due. In most cases, a single missed account is not detrimental to your bureau score if you pay before the 30-day mark. If you pay late, you might get charged a late fee.

The information in your bureau reports plays a crucial role in calculating your scores. When you go 30 days or more past due on any account, your bureau scores will suffer.

Why does lenders rely so heavily on a payment profile history?

Credit providers want to ensure that they get their money back with interest when they offer you a loan, credit card or asset-based finance. Creditors heavily rely on the current Payment histories of your loans or credit cards accounts.  Having a solid repayment history will be beneficial to you when these NCR registered lenders decide to approve your new application.

Repayment profiles are the most recent and relevant data on the willingness and ability to repay financial agreements. You will have a tough time getting approved for new financial facilities, home loan finance, and vehicle finance if you have missed payments in the past. Your finance application will get declined if you have judgments, defaults, or collection notices listed. 

Where can I see if an overdue payment got reported on my bureau report?

Those who have not received approvals for new facilities should check all four of their bureau reports. Under the National Credit Act, you have the right to a free bureau report from each of the four major bureaus: Experian, Compuscan, XDS, and TransUnion. Check that payment modifications are being reported correctly after registering for a recent bureau report.

You can also check your account activity with some bureaus by registering on their website and gaining access to your profile. Additionally, some bureaus offer to notify you when your score changes. There might be a small fee associated with this service, but the investment is well worth it. You will be able to view your scores also anytime and get notified when it changes.

How can I recover if I slip up and pay an account late?

Example 1: An account got paid late and is overdue by one month.

While you will probably get charged an overdue fee, your bureau score will not be negatively affected if you pay the past due arrears amount as soon as possible.

Example 2: If the account is more than two months late.

You must pay the arrears on this account as soon as possible. A sixty-day arrears indicator is a real problem, but it is not as bad as a 90-day arrears indicator, which is not as bad as the 120-day arrears indicator. Unfortunately, your bureau score has now taken a hit, but the sooner you can pay off the arrears, the better off you will be.

Example 3: When an adverse account was reported to the bureaus in error by a registered NCR lender.

Occasionally, bureau reports contain errors. You may want to dispute incorrect information, such as a payment considered late when you made a settled the due amount on the due date. You can raise this issue with the particular bureau or the creditor so that they will remove it from your bureau report. We will handle this frustrating process on your behalf if you struggle with raising this with the bureaus and creditors.

For my payment profile to positively impact my score, how long do I have to keep it?

You receive a good score when you have at least one good open account reporting to the different bureaus for a minimum of six months. By paying your accounts on time and establishing a good mix of account types, you can continue to build a good payment profile. A good mixture of accounts would include personal loans, home loans, vehicle loans, and revolving lines of credit like credit cards and clothing accounts. Consumers financial situations vary, so the time it takes for their bureau scores to rise is different.

How long does my repayment history remain on my bureau report?

The information can stay on your bureau reports for five years from the last update. However, a poor history loses its impact over time.

Can I avoid being reported late if I make a partial payment?

No, unfortunately not. When you can't afford the minimum installment that is due, it may seem like a good idea to pay a lesser amount. You will not be able to avoid an adverse repayment history. A partial settlement of the monthly due installment can even get you sent to the NCR registered lenders collections department, which will result in endless collection phone calls.

What can I do to avoid missed or partial payments?

By using these strategies, you can prevent financial problems:

  • Plan to send emails, cell phone alerts, and calendar reminders about accounts with due dates coming up. Set up multiple electronic nudges if more than one is needed.
  • Pay the minimum due on all accounts using bank stop orders. You can always make another transfer again later if your budget allows. You will never have to worry about delinquent payments on all your due accounts.
  • Moreover, consider paying off your credit cards periodically throughout the month. A weekly or biweekly payment protects your account both from overdue repayments as well as from missing payments. The second-biggest influence on your credit score is your credit utilization, which improves when you keep your balance low compared to your credit limit.
  • Consider debt review to deal with any uncontrollable debt and protect your payment profile and bureau scores. Debt review is a way to help consumers who are having difficulties meeting their monthly debt obligations. Debt counsellors negotiate payment arrangements on your behalf, reducing your monthly payments to a manageable amount ensuring no legal action is taken against you. Read the following articles to learn more about debt review and how it can help protect your payment history.

When should I close an account that is in good standing with a good payment profile?

It is essential to be careful about closing old accounts or opening new ones because your score is affected by the length of your history. However, it is essential to note that the average age of accounts is not necessarily the most influential factor. More than half of your score is determined by your repayment profile, your payment history, and how much you owe to credit providers. Maintaining a good payment profile and increasing your scores with all the different bureaus can be achieved by paying your accounts on time and keeping a low utilization rate on all your accounts.

Our recommendation is to keep an account with a solid payment profile and then work on closing accounts with a less than stellar payment history.

When should I close an account that has a poor payment profile?

It is essential to close adverse accounts as soon as possible because the negative history will affect your score while it remains open and unpaid.

Contact the lender if you decide closing the account is the best option and ask if there are any outstanding charges or fees. Ensure the registered NCR Lender sends you a paid-up letter once the account has been closed. Later, if the creditor still reports on this account even after full repayment, the paid-up letter will be necessary to dispute this inaccurate information.

Both your life and lifestyle are affected by your different bureau ratings and scores. Having a poor payment profile history, low score or having adverse listings on your report can severely impact your ability to buy a home, rent a flat, or find a job. In addition, you will likely get forced to pay thousands of rands in high-interest rates and security deposits.

Credit Salvage can help you improve your different bureau reports, payment profiles and remove adverse listings so that you can improve your life and lifestyle! We can assist you with credit clearing, credit bureau clearance, and ITC clearance. Please read the following articles or contact us today. In addition, we have an online credit repair application where you can easily apply for our services.

Payment profile history

Conclusion: Protecting your payment profile history will improve your creditworthiness, credit score and bureau reports.

Having a solid payment profile will show potential registered NCR lenders that you can pay your accounts on time.  This good payment profile will increase your scores and your creditworthiness. A poor payment profile and history with numerous late payments will hurt your payment history. A poor payment profile will adversely affect your bureau scores and show potential credit providers you are a high-risk borrower.

You can build a solid payment profile history on your credit report by sticking to a budget and paying your accounts on time every month. Having this done every month will increase your chances of getting credit when you need it.

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Home loan Finance - How to get home loan finance

Home loan finance

Home loan finance - How to get a home loan.  

Buying a property and applying for a home loan finance can seem daunting and overwhelming, especially if you have never done it before. When applying for a home loan, you need to determine what documents you need, how long it takes and under whose name the property deed will get registered. While all the above can leave you feeling discouraged, we will provide you with information that will enable you to start the process with confidence.

 Even though banks have adopted stricter risk assessment procedures, they have not prevented creditworthy consumers from getting home loans.

Despite these stricter risk assessments, banks still want to grow their good customer base. Banks are, therefore, more likely to offer home loan finance to consumers who have a stable income and a history of making payments on time. In addition to that, the applicants must demonstrate that they can afford their repayments. Before you apply for a loan to purchase your dream home, you should arm yourself with as much knowledge, information, and documentation as possible.

No matter who you are or what you do for a living, we have created a guide to help you increase your chances of getting approved for your home loan finance. 

Plan way ahead for your home loan application by beginning your financial planning early. 

Plan for bond finance for at least six months before you go house hunting. In addition to saving up for a large deposit down payment and working on your credit score, you need to prove to the banks that your income and affordability will cover the bond instalment. You should have a set budget before you begin your home-hunting expedition and stick to it for the next six months. Do not spend more than you need to during these six months in your quest to finance your perfect home. During these six months, it will also allow you to work on your credit scores.   

Work on your credit bureau report and credit score.

Your credit score is one of the most important aspects of getting pre-approved for a bond. A good credit bureau report and bureau score have multiple financial implications, including determining your interest rate, as well as whether you will be pre-approved for home loan finance. 

Knowing your creditworthiness in advance of your home search could allow you to fix it, if necessary. Obtaining a copy of your credit report is the best thing you can do, even if you believe your bureau report and scores are good enough for a bond pre-approval certificate. That way, you can review your credit scores carefully for any adverse listings. 

Improving your credit score can sometimes be as easy as removing paid adverse listings and disputing credit bureau listing errors. If you catch them late, you may not have time to fix the poor listings before applying for your home loan financing. While you are attempting to finance your dream home, we recommend that you, as a precaution, hold off on searching for other non-bond credit facilities. A high number of credit checks might affect your credit score, which will be damaging when you are ready to apply for a bond.

For you to make informed decisions, you must know everything about your financial situation. If you have any concerns about your credit report or limitations, feel free to contact us. We are seasoned credit bureau specialists, and we will be the best ally in your credit clearance journey. We have hundreds of excellent reviews, are affordable and, most important, we care. To apply online for our credit bureau clearance, please click the picture below. 

Credit Salvage Credit clearance online application

Get rid of any low balance debts and payday loans.

Apart from low scores, accounts more than 30 days in arrears are the number one reason a bank declines a new bond application. Pay off any adverse accounts and close all payday loans. 

If you have a high balance debt, consider paying it off before you buy a home.

Make yourself a more attractive applicant, and you will get your finance approved for higher amounts at lower interest rates. If you have low debt-to-income ratios with all four major credit bureaus in South Africa, you will have a better chance of succeeding with your home loan finance application. Pay down high balance debts before you approach all the banks for home loan finance. Consider cutting your expenses and pay more into your high balance debts. The result will show an acceleration in you paying off these debts. 

If you cannot afford the repayments on your high balance debt, take action before your credit score suffers. Debt counsellors can negotiate lower interest rates and reduced monthly payments on your behalf if you are borderline over-indebted. As a result, your debt will be more manageable, and your credit score will not be negatively affected during your search for a property. As you pay off your high balance debt, you will not be eligible for a bond if you use the debt review process. While not having access to credit is perceived by many as a negative attribute, paying off high balance debt remains a vital step in becoming a homeowner. Contact us and find out if the debt review process can be beneficial to your situation. 

Stable employment is essential. 

There is nothing that can replace the impact of having a stable employment history. Whether you are an accountant, an attorney, or a receptionist, you must prove to your bond lender that you have been in your position for at least a year or two. 

During this period, looking for other employment opportunities is not recommended. Consumers currently between jobs are unlikely to get a bond pre-approval in place, as banks want to see financial stability. Consider holding off on the job hunt until after you have successfully secured your bond finance. If you don't have a stable employment history with the same employer for at least one year, start as soon as possible. 

Pre-approve your home loan financing early.

Getting pre-approved for bond financing is different from getting pre-qualified. A bond pre-approval involves approaching a bank and asking for a bond pre-approval certificate. You will use this certificate to obtain financing in the not-too-distant future. Using your credit score, employment history, and current financial situation, the bank will determine the amount you can borrow for your home purchase. In the case of a successful pre-approval, you will receive a pre-approval letter that you can use to bargain when buying your home. 

You should consider getting pre-approved or qualified early in your property search if you want to be ready to make an offer as soon as you see a property you are interested in purchasing. With your pre-approval, you will be able to move fast once you find the right property. A real estate agent may also ask you to fill out a pre-approval checklist form before helping you with your application process. Having a bond pre-approval in place first will demonstrate that you are serious about buying and ready to start applying for home loan finance right away.

Prequalifying for a bond. What are the advantages?

  • You can begin house hunting within your appropriate price range when you know what you can afford.
  • You will appreciate that you have improved your credit profile and have an excellent credit score. For your bond application to be approved, your credit score should be at least six hundred. If you have a low credit score, you need to work on improving it. In point one, we talked about how we can help you improve your credit report and score. Contact us today or apply online for our service here.  
  • When a pre-approved buyer shows the seller that they have done their research on what they can afford, the offer from the buyer is more appealing to the seller, and you will have the power to negotiate to lower the selling price. 
  • A pre-qualification for a home loan means understanding your credit profile and what you can realistically afford in monthly repayments. Unfortunately, a pre-approval does not guarantee the bond will be approved, but it shows you how much the banking institution will consider funding a bond. As an added benefit, you will be able to shop within your affordability price range when you are looking for a house, thereby avoiding rejections based on affordability. 

Guarantee your home loan approval with a fully guaranteed certificate.

To ensure your offer stands out from other potential buyers, you might consider asking your bank for a fully underwritten finance pre-approval certificate. As a result, not only will the process of home loan approval be faster, but it will also demonstrate your seriousness as a buyer who has already been credit vetted.  

This pre-qualifying process involves a bank evaluating your credit history, credit score, income, debts and determining how much you can afford. The bank will issue a pre-qualification certificate which you can use to show sellers you have been pre-vetted. If your financial situation and creditworthiness have not changed since pre-approval, and you meet other conditions, you will receive your home loan approval in principle very quickly. 

Make sure you are honest when applying for a home loan finance pre-approval.

The home loan pre-approval application should not contain any false or misleading information! In the bond application stage, the lender will rigorously evaluate your financial and employment history so, any fabrications you do during the pre-approval stage will stand out. 

Deposit.

It is often difficult for buyers to come up with a suitable deposit during the buying process. However, if you can make a larger deposit, such as twenty per cent or more, compared to the usual ten per cent deposit, you will have a better chance of getting your bond approved by the bank.

A substantial down payment can show lenders you are serious about buying and have the money to prove it. The following are the benefits of paying a substantial deposit during the home loan application. 

  1. Sellers will prefer your offer to purchase. 
  2. The amount of financing required for bond approval is less. Saving twenty per cent of a properties price as a deposit, for example, would allow you to pay twenty per cent off the purchase price immediately. As a result, you borrow less from the bank and incur a whole lot less interest throughout the loan period, which can add up to a substantial saving. 
  3. In addition to making your offer more attractive to lenders, a substantial deposit down payment can also reassure sellers that your financing is secure, which could increase your chances of getting the home.
  4. A substantial deposit will show the seller and the bank that you are serious, and in the process, you willreduce your monthly repayments and qualify for lower interest rates.

Prove your financial stability and affordability to repay your bond instalment.

During assessing whether you qualify for a loan, banks look for evidence that you will be able to repay the new bond instalment without defaulting. 

It is possible to improve your chances of qualifying for your new bond by demonstrating your financial stability. The following indicators are signs that you are financially stable:

  • Currently, you do not have much debt on your active credit lines. For instance, your credit card has a credit limit of R10 000, but the outstanding balance is only R3000. This account reflects that you do not use credit actively. 
  • Payments on your active accounts get paid on time without any missed indicators. 
  • You can limit your spending when needed.  
  • You have a good repayment history with past creditors.
  • Banks like to see a good repayment history on historical accounts which, indicates responsibility and consistency.
  • Every year, your net worth grows. There is a steady, constant increase in your net worth. Your investment portfolio should increase due to your savings, regular investments, and good returns on your investments.
  • You will be able to pay for your monthly living expenses without relying on credit cards and payday loans. Credit cards and payday loans are common ways for financially unstable people to survive until the next payday. Not depending on these financial instruments indicates that you are financially stable. 
  • Your cheque account never gets overdrawn. Despite an overdraft on your cheque account, you still show that your account always has room for movement, rather than relying on the overdraft. Moreover, you never go over your overdraft limit under any circumstances. 

Home Loan finance How to get a home loan infographic

Once the hard work is over, it is now time to complete the home loan application.

You have now made an offer on your dream house, now is the time to apply for finance. Start by sending your application to the bank that granted you a pre-approval bond certificate. Next, contact all the other banks in South Africa or fill out their online bond applications. It is easiest to apply for home loan finance with a reputable bond originator who will handle the application process for you with the banks. 

You should know what your options are when it comes to the different bonds available. 

Essentially, there are two options when it comes to home loans. In the first place, you can use a traditional or ordinary bond to buy an existing or newly constructed residential property. The second option is a building loan, which gives you the funds to build your new home. Alternatively, you can use a building bond to make improvements or extensions to your existing home.

Which applicants are eligible to apply for home financing?

Every home loan application will get assessed individually, so whatever type of job you have, you must show your bank that you have a stable, steady, and reliable source of income necessary to repay the bond instalment monthly.

The bank will consider the following factors when evaluating a bond application:

  • Credit history and credit scores
  • Employment history and income
  • Monthly living expense costs and how much money you have left for a bond instalment. 
  • Value of the property and its asking price.
  • Amount of deposit available as a down payment. Putting a substantial deposit down will increase your chances of a positive outcome. However, saving up for a deposit, whatever type of home loan you are applying for, is still arguably the best way to improve your chances of getting the finance you need from your bank.

How to apply?

The following section will be helpful if you prefer to deal with the banks directly rather than using a bond originator. Despite some differences in the application processes of various banking institutions, you can generally choose from the following options:

The lending institutions website online application process.

Online bond applications are available from all banks and non-banking institutions. The online tool usually includes an instant credit and affordability check, so you will know what sort of price range to look in immediately. The decision will be sent to you within a few hours after you submit your application. You can visit the following institutions to do an online home finance application:

The lending institutions branch.

The majority of banks will help you through the home loan application process in-branch.

Documents needed for an assessment. 

You will find that the requirements for each bank vary depending upon your circumstances or the property you wish to purchase or build. The following documents are generally required: 

  1. The application form for the home loan must be fully completed and signed by all applicants (single or joint applicants) 
  2. The bank will require a comprehensive outline of your monthly income, deductions on your pay slip, living expenses, assets, and liabilities.
  3. Copies of your identity documents. Include both sides of your ID card. 
  4. The banks will require stamped bank statements for the past three months and self-employed individuals for the last six months of bank statements.
  5. Three months' worth of pay slips. Audited financials for a year or two for self-employed individuals.  
  6. Marriage certificate
  7. If you receive maintenance income, please provide the bank with your three most recent bank statements, originals stamped by the bank branch, reflecting the maintenance payments. For their records, the banks will also require a copy of the court order. 
  8. As a last step, the bank will need a copy of the signed offer to purchase.

Conclusion

Having the necessary information is key to getting home loan finance to buy your dream property. Follow these guidelines, and your home loan finance application will be much more likely to be approved. Sadly, some people cannot qualify for a bond, and some are unlikely to have the mitigating factors, such as a ten to twenty per cent deposit down payment, to be eligible for finance. 

If you have a poor credit report, it need not stop you from owning a home. Poor credit history is only one piece of your overall financial picture. If you have the income and savings to afford a home, buying may be the right choice for you. For assistance with clearing your credit reports and improving your credit scores so you can qualify for bond finance once again, contact us today. With our help, support and guidance, you will be able to become a proud homeowner once again. 

Sources - Other good reads

 credit clearance header

Debt Review - Everything You Need to Know.

 

Debt accumulation is quite common, especially with the recent economic fluctuation and people being out of jobs due to the Covid-19 pandemic. Approximately 3 million individuals lost their jobs in South Africa after the pandemic hit.

Those who retained their jobs reported not having income during this period. Out of this statistic, women represented about two million of those who lost their jobs.

When lawyers or collectors come calling, you have no option but to comply and find funds to repay your overdue credit agreements. In some cases, this may seem complicated, especially if your debt-to-income ratio is high.

However, a debt review can help you pay back what you owe in a calculated manner to ensure you get to keep some cash for your daily use.

If debt review is new to you, this article will provide all the knowledge on debt review and why it is correct.

What Is Debt Review?

Debt review refers to a formal rehabilitation program that provides financial advice to consumers generally paralyzed with debt repayment. Such consumers tend to have a high income to debt ratio, affecting their timely monthly installment payments.

The process of debt review involves tasking your debt counsellor with the job of negotiating your debts with the respective institutions. In addition, your debt counsellor will analyze your debts, income and help you create a payment plan for your debts.

What Are the Benefits of a Debt Review?

There are numerous advantages of debt review. These benefits are not limited to:

Scheduled Payments

It is common to accumulate large sums of money as debt. Most people may fail to realize that their spending is more than their income hence leveraging on debt. An accumulated debt may be difficult to repay as you may find yourself without money to survive on.

A debt review process ensures that a debt counsellor gets assigned to you, who will negotiate with debtors on your behalf. For example, if you were supposed to pay R500 in a month, a debt counsellor may lengthen your payment schedule to 4 months or more to allow you to keep some of your income.

The scheduled payments will offer you relief when paying back your debt.

Reduced Interest Rates

Debt counselling also accords you with the benefit of enjoying reduced interest rates on your loan. Failure to pay back your credit agreements on time results in interest accumulation, making it challenging to repay your loan.

Your debt counsellor will negotiate with your creditor on your behalf for reduced interest rates. The result ensures that more of your money goes into payment of the principal amount and not the interest.

Simplifies the Process

If you have several accounts to repay from different creditors, it is common to lose track of due payments. With a debt counsellor, you get to pull together all your financial accounts and only make one payment instead of having to make several payments.

Physiological Relief

Owing debts can have a physiological effect due to the overwhelming feeling of inability to repay all your credit agreements. In addition, over-indebted consumers may not have enough income to service their accounts on time, resulting in a significant impact on their mental health.

Signing up for a debt review program helps you service part of your loan as you get to save a little on the side to support your daily needs. It can be overwhelming not to fully pay all your accounts and, at the same time, unable to cater to your everyday needs.

A debt review program can help you reduce your debt without having to lose your wit over its accumulation and inadequate funds to repay.

A Better Alternative to Sequestration and Administration

Most people who cannot repay their credit agreements opt for administration and sequestration to wade off the creditors. Unfortunately, these two processes take a considerable amount of time for approval. In addition, creditors will still be knocking on your door demanding payment.

A healthy alternative is a debt review process. Debt counselling ensures that you still get to retain your assets and exercise entire administration over them while paying back your all your credit agreements in a flexible manner.

Avoid Creditors

A debt review program will negotiate with creditors on your behalf. This way, you don't have to answer calls or emails asking when you plan to pay back your debt.

Essential Items to Know About Debt Review

Pulling yourself out of a debt trap entails specific things an individual should be aware of. Some of these items include:

Debt Counselling Qualification

Despite it being an ideal option for people in debt, not everyone can qualify for a debt counselling program. Everyday items that counsellors use to assess your qualification are income, number of accounts, outstanding balances, and living expenses.

Having too many accounts does not qualify you for debt counselling. However, being unable to repay your debts makes you eligible for a debt review program.

In addition, if your creditors take legal measures against you for lack of payment, you may not be eligible for a debt review program. For this reason, it is essential to seek a debt review before creditors take necessary legal steps.

If you are unemployed, you are as well unlikely to qualify for a debt review program. Employed persons are guaranteed a monthly income allowing them to pay down their accounts on an installment basis. As an unemployed individual, it may be challenging to demonstrate your capacity to repay the debt hence being ineligible.

Creditors Won't Take Legal Action!

Signing up for a debt counselling program means that your creditors will not be able to take any action against you. Therefore, it will create peace of mind for you to focus on other activities instead of the constant worry of asset repossession or legal action.

Once you clear your debt, the debt management company will issue you a clearance certificate stating that you are out of debt. This clearance certificate will then help you apply for future loans.

Monthly Payments Are Reduced

Signing up for a debt review program means that your monthly debt repayment amount decreases to an amount you can afford. Debt accumulation may render it impossible for most individuals to have enough money for sustenance.

With debt counselling, your counsellor weighs how much you owe versus your expense and income. These figures will help your counsellor develop a percentage that will allow your debt to continue repayment while you still get to afford your living expenses.

Debt Counselling Isn't Free!

A debt review program is an essential service that takes the load off your debt repayment. This work involves constant communication with creditors.

Some of the fees you will have to pay for a debt review program are application fees and ongoing administrative fees. You will be required to pay the application fee before joining the program.

The administration fees are monthly-based payments that debt counsellors offset from your monthly installment. So, for example, if you pay R1 500 to your debt counsellor, they may take R200 for administration fees and give the remaining R1 500 to your creditors.

You Can't Take More Credit.

Signing up for a debt review program hinders you from taking additional debt from creditors. The program allocates you a monthly payment plan which you will have to adhere to. A debt review may take a considerable amount of time to repay all your debt entirely.

Once you clear your debt, the company will issue you a clearance certificate to prove that you have completed paying your debts. After that, you can apply for loans from crediting institutions or individuals.

Longer Repayment Period

A debt review program will reduce the amount of money you require to pay each month. Despite being a benefit on your income and expenses, it prolongs the debt repayment period. You may end up paying the debt for years which ties you to your income source.

You Can't Skip a Payment without having a valid reason.

While on a debt review program, it is essential to stick to the payment program that your debt counsellor provides. Failure to adhere to the monthly payments can result in a nullification of your entire payment plan.

Your debt review will be successful if you diligently pay your monthly installments to your debt counsellor. If you cannot make a monthly payment, it is necessary to notify your debt counsellor to allow them to make the required adjustments to your payment plan.

Setting up a Business

While it may not be advisable to start a business while under debt review, the process does not hinder you from setting up your business. However, it is essential to stay focused on repaying your debt to avoid accumulating more debt.

Starting a business while still under debt review can result in bankruptcy and an impaired cash flow for your business.

Credit Record

The benefit of signing up for a debt review program is that your debt accumulation will not be a permanent record on your credit history. In addition, unlike blacklisting, where it is impossible to clear your name, a debt review program can help you wipe your credit history with a credit bureau clearance, deeming you eligible to apply for future loans.

Debt Review Rewarding benefits CSC

Debt Review Steps

The following is a breakdown of how the debt review process works.

Find a Debt Counselor

The first step in the debt review process is locating a debt counsellor to walk you through your repayment process.

There are plenty of debt counsellors in the market. Before hiring a debt counsellor, you should check that they have obtained registration with the National Credit Regulator. Debt counsellors cannot provide the service of debt counselling without prior approval and accreditation with the National Credit Regulator.

A debt counsellor that is not registered may fail to remit your repayment to respective creditors, costing you more money.

To find out if the debt counsellor is reputable, you can check their website for reviews and feedback on service delivery and creditors' relations. In addition, you can check the NCR website to find out whether they are registered.

Complete an Application Form (Form 16)

Once you confirm that your debt counsellor is credible and duly registered, you can proceed and fill out an application for inclusion in the debt review program. Your debt counsellor will provide you with the application form, commonly known as form 16.

Once you complete filling the form, you need to attach the following documents to accompany your application:

  • Bank Statements
  • ID copy
  • Power of attorney
  • Payslip
  • Account statements.

The debt counsellor will use these documents to analyze your financial status and ascertain the extent of your debt and capacity to pay it back.

Your debt counsellor will prepare a budget and a proposal for clearing your debts based on the analysis. The budget and the proposal will help you retain some amount to support your daily living expenses.

Debt Assessment

At this juncture, your debt counsellor will assess whether you are over-indebted and examine whether there have been incidences of reckless lending.

A timeline of 30 days is given to the debt counsellor to gather all the necessary documentation from the credit provider and counsellor to complete the debt assessment.

Notify Creditors of Your Debt Review Program

Once you submit your application to the debt counsellor, your debt counsellor should notify your creditors of your application. The notification gets sent by using form 17.1.

The form will require your creditors to provide details of your balance. The creditors will provide statements in the form of a COB, Certificate of Balance. The paper will have the following information:

  • Account number
  • Account Type
  • Surname and Name
  • Details of Creditor including the registration number
  • Monthly Installment
  • Outstanding Balance
  • Arrear's amount
  • Insurance amount
  • Interest rate

The COB provides enough details for your debt counsellor to utilize when providing a suitable proposal to your creditors.

Debt Counselor Declares Your Status

After reviewing your application and the Certificate of Balance, your debt counsellor can now declare whether you are over-indebted or not.

If you are indebted, the debt counsellor sends a notification form of 17.2 notifying your creditors that your debt review application was successful.

Suppose your debt counsellor renders you not to be indebted. In that case, a similar form will be sent to your creditors by your debt counsellor, notifying them of your unsuccessful application for the debt review program.

Upon approval of your debt review, your debt counsellor will provide a proposal with the following information:

  • Account number
  • Name of the credit provider
  • Original interest rate before debt review
  • Initial installment rate before debt review
  • Proposed new interest rate percentage
  • Proposed new restructured installment
  • Number of months for repaying the debt
  • Procedure detailing how you will repay the debt.

Your creditors will reply to the debt counsellor within ten days by either accepting the proposal or making adjustments.

Consent Order

After that, the debt counsellor shall approach the courts to obtain a consent order within 60 days after submitting your application. The consent order bars your creditors from taking legal action against you.

Payment of Reduced Installment

Most debt counsellors have payment distribution agents whom you pay your reduced or restructured installment. However, it is essential to note that you are eligible for debt counselling removal if you fail to abide by the monthly structure installments and your proposal becomes nullified. In addition, creditors have the liberty of taking legal action against you.

Clearance Certificate

Upon completing your debt payments, the debt counsellor will issue you with a clearance certificate and notify the credit bureau to clear your name from the credit bureau in South Africa, the National Credit Regulator, and all credit providers.

When blacklisted, clear your name by signing up for a debt counselling program and obtaining an ITC clearance.

Debt Review Removal/Debt Counselling Removal

Signing up for a debt review program is voluntary, and you can wish to opt-out any time. However, debt counselling is a regulated program, and exiting the group requires a process.

Most people may want to opt out of a debt review program after their financial situation stabilizes or desire to access credit from institutions.

Foremost, you need to notify your debt counsellor of your intention to exit the program. Then, your debt counsellor will try to talk you through the consequences of leaving the program.

You can exit the program when:

No Court Order Has Been Given.

Once a debt counsellor approves your application and notifies your creditors, you can opt out of the repayment plan provided a court order has not yet been issued.

The consequence is that your creditors can take legal action against you if you are in arrears.

You will need to provide information to the courts about your change of financial situation, which puts your debt review program to an end.

A Court Order Has Been Issued.

When a court order is in place, it will be challenging for you to exit the program. The only option you have is to fast-track your payments to settle all your debt accounts.

It is essential to keep in touch with your debt counsellor to understand if a court order has been issued. Then, as per the legal procedure, you should sign a confirmatory application provided to you by your debt counsellor.

If you fail to sign the form and submit it to the courts within 60 days, creditors can take legal action against you since the agreement has not yet been deemed legal.

If your financial status has improved, it is essential to notify your debt counsellor to amend your standing as not being over-indebted.

Credit Salvage Credit clearance online application

When Should You Consider Debt Counselling?

Debt repayments can take a toll on you. You can easily transition from someone who can make ends meet to someone struggling to meet daily needs. If you are in one of the situations below, then you should consider applying for a debt review program:

Can You Save Money?

If you end up working, earning income but barely having any amount to saveon the side, a debt counselling program is right for you. It is advisable to always have an emergency fund in case of any future incidences such as medical expenses.

If you cannot save for an emergency fund, you can easily fall into debt sooner than expected.

Do You Have Sleepless Nights?

Do you find yourself staying up at night trying to devise ways to repay your debt? It is a sign that your financial situation cannot cater to your piling debts.

Seeking counsel from a debt management company can help set you on a smooth course to repay your debts.

Do You Depend on Credit to Cater for Daily Expenses?

If you find yourself living from credit to credit, then it is a clear sign you need the services of a debt counsellor. Taking out loans to cover basic needs such as water or food can further put you in debt. Relying on credit means more of your income goes towards servicing your accounts, which ends up prolonging your repayment process.

Are You Unable to Make Timely Payments?

If you are already receiving numerous calls and emails on your overdue payments, you are in the cycle of debt. You need to review your finances and also talk to a debt counsellor on the best course of action to take

Is A Debt Counselling Program Right for Me?

Debt repayment through a debt management company may take years for you to finalize. But the process ensures that you get to retain your assess and cater to your daily needs.

A professional debt counsellor will walk you through paying your debt and provide financial counselling to help you manage your money after completing your debt review program.

We are a professional debt counselling/ debt review and credit clearance organization offering services on credit clearance, settlement negotiations, credit reports, and debt counselling. Contact us today to find out more about how debt review can change your life.

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