Debt Counselling: How to Get Out of Debt

Debt counselling has become a vital tool for millions of South Africans overwhelmed by debt. With household debt in South Africa exceeding R2 trillion and over 700,000 consumers currently under debt review, understanding how debt counselling works and how it can help you regain financial stability is more important than ever.

What Is Debt Counselling?

Debt counselling, often called debt review, is a regulated process introduced under South Africa’s National Credit Act (NCA) of 2007. It is designed to assist consumers who are struggling to meet their debt obligations by restructuring their debt repayments in an affordable and manageable way. The process is overseen by the National Credit Regulator (NCR), ensuring consumer rights are protected throughout.

When you enter debt counselling, a registered debt counsellor assesses your financial situation, negotiates with your creditors, and proposes a realistic repayment plan based on your disposable income. While under debt review, your credit record will be flagged, restricting access to new credit but protecting you from legal action by creditors, provided you adhere to the agreed payment plan.

Current Landscape of Debt in South Africa

As of 2025, South African household debt stands at approximately R2.077 trillion. The debt review system currently supports over 717,495 consumers who have applied to restructure their debts due to over-indebtedness. This number reflects the growing reliance on debt counselling as a lifeline amid economic pressures such as inflation, unemployment, and rising living costs.

The National Credit Regulator has recently issued updated guidelines to improve the debt counselling process. These include clearer directives for credit providers to cancel debit orders and payroll deductions once a consumer applies for debt counselling, helping consumers allocate funds for necessary fees and insurance related to the process. This regulatory support aims to enhance fairness and transparency, enabling consumers to navigate their financial difficulties with more confidence.

How Debt Counselling Works: Step-by-Step Guide

Step 1: Recognise You Need Help

If you find yourself consistently struggling to meet monthly debt repayments, juggling multiple debts, or receiving collection calls, it may be time to consider debt counselling. Signs include:

• Missing payments or paying only minimum amounts.
• Using new credit to pay off existing debts.
• Constantly stressed about finances.

Step 2: Choose a Registered Debt Counsellor

It is crucial to work with a debt counsellor registered with the National Credit Regulator (NCR). You can verify registration on the NCR website. Avoid unregistered or unscrupulous operators, as they may worsen your situation.

Step 3: Application and Financial Assessment

You will provide your debt counsellor with detailed information about your income, expenses, assets, and all outstanding debts. The counsellor will assess whether you are over-indebted as defined by the NCA.

Step 4: Proposal to Creditors

If deemed over-indebted, the debt counsellor will draft a debt restructuring proposal, which includes a consolidated monthly repayment amount based on your disposable income. This proposal is submitted to all your creditors and the National Debt Help System (DHS) to update your credit profile with a debt review status.

Step 5: Creditors’ Response and Court Order

Creditors have 10 business days to respond. If they agree or do not object, the debt counsellor applies for a debt re-arrangement court order from the Magistrate’s Court under section 87 of the NCA. This order legally binds creditors to the new payment terms.

Step 6: Repayment and Monitoring

You make one affordable monthly payment to your debt counsellor or a payment distribution agency, who then pays your creditors. The debt counsellor monitors your payments and can adjust the plan if your financial situation changes.

Step 7: Completion and Clearance Certificate

Once you have paid off all the debts under the debt review, the debt counsellor issues a clearance certificate. Your credit record is updated to remove the debt review status, allowing you to rebuild your credit rating.

Practical Example: Debt Counselling in Action

Consider a consumer earning R15,000 per month with the following debts:

• Credit card debt: R50,000 at 20% interest
• Personal loan: R30,000 at 15% interest
• Store account: R10,000 at 25% interest

Monthly minimum repayments total approximately R5,500, which is over one-third of their income, leaving little for living expenses.

After entering debt counselling, the debt counsellor calculates disposable income after essential expenses and proposes a consolidated monthly repayment of R3,000. This reduced amount provides breathing room for the consumer to meet living costs while steadily paying down debt.

Creditors agree to the revised terms, and the consumer pays R3,000 monthly for 24 months. At the end of this period, all debts are settled, and the consumer receives a clearance certificate.

Benefits of Debt Counselling for South African Consumers

• Legal Protection: Creditors cannot take legal action or repossess assets while under debt review (unless legal proceedings started before application).
• Affordable Repayments: Payment plans are tailored to your financial capacity, preventing further financial strain.
• Single Payment: Consolidate multiple debts into one manageable monthly payment.
• Credit Profile Management: While your credit profile is flagged, this is not blacklisting; it is a legal status that protects you and is removed upon completion.
• Prevention of Further Debt: New credit applications are restricted, helping you focus on repaying existing debt.
• Opportunity to Rebuild: After clearance, you can rebuild your credit score over time with responsible financial behavior.

Common Concerns and How to Address Them

Will Debt Counselling Ruin My Credit Forever?

Your credit profile will show a “debt review” status, which restricts new credit access during the process. However, this is temporary and legal protection, not blacklisting. Once you complete debt counselling and receive a clearance certificate, the flag is removed. Rebuilding your credit score depends on maintaining good financial habits after the process.

What If I Miss a Payment?

Missing payments can terminate your legal protection, exposing you to creditor legal actions or asset repossession. If your income changes or you face emergencies, communicate immediately with your debt counsellor to adjust your plan accordingly.

Can I Exit Debt Counselling Early?

Yes, but only under specific conditions. If you are found not to be over-indebted, your application may be rejected. If you want to exit after being accepted, you must settle your debts or obtain a court order. Voluntary withdrawal does not automatically remove the debt review flag from your credit profile.

How to Choose a Reliable Debt Counsellor?

• Verify registration with the National Credit Regulator (NCR).
• Look for transparent fee structures and clear communication.
• Check reviews and recommendations.
• Avoid upfront fees before assessment.

Real-World Scenario: Navigating Debt Counselling Successfully

Thandi, a South African consumer, found herself owing R120,000 across credit cards, personal loans, and store accounts. With a monthly income of R18,000, her combined monthly debt repayments exceeded R6,000, making it impossible to cover essential living expenses.

She contacted a registered debt counsellor who assessed her finances and confirmed she was over-indebted. A repayment plan of R3,800 per month was negotiated with creditors. She paid this amount for 36 months, after which she received a clearance certificate.

During the process, Thandi’s credit profile was flagged with a debt review status, so she could not apply for new credit. However, she was protected from repossession and legal action. Once cleared, she focused on rebuilding her credit by paying bills on time and avoiding new debt.

Important Regulatory Updates in 2025

The National Credit Regulator (NCR) has introduced updated guidelines in 2025 to improve the debt counselling process. Key changes include:

• Mandatory cancellation of debit orders and payroll deductions once a consumer applies for debt counselling, protecting their disposable income for fees and repayments.
• Clearer timelines for creditors’ responses to restructuring proposals.
• Stronger consumer protection measures to prevent unfair credit provider practices.

These updates aim to make the debt review process more efficient and equitable, fostering a healthier credit market and supporting South Africans in financial distress.

Practical Tips for Consumers Considering Debt Counselling

• Act Early: Don’t wait until debts spiral out of control. Early intervention improves outcomes.
• Keep Detailed Records: Maintain copies of all correspondence, agreements, and payment receipts.
• Budget Carefully: Track your income and expenses to understand your financial capacity.
• Communicate Openly: Inform your debt counsellor of any changes in income or unexpected expenses immediately.
• Avoid New Debt: While under debt review, do not apply for new credit to prevent complications.
• Understand Fees: Debt counselling involves fees, including assessment and monthly administration fees. Ensure these are clearly explained upfront.

Conclusion

Debt counselling remains one of the most effective, legally protected methods for South Africans to regain control over overwhelming debt. By working with registered, reputable debt counsellors and understanding the process, consumers can restructure their debt repayments into affordable amounts, avoid legal action by creditors, and ultimately achieve financial freedom. With over 700,000 South Africans currently benefiting from debt review and ongoing regulatory improvements in 2025, debt counselling offers a practical and hopeful pathway out of debt.