When you feel overwhelmed by debt, it is difficult to believe that you have options. But the fact is that you do. The important thing is to know what they are.
At Bayport Money Solutions, we often find that employees are reluctant to agree to debt
consolidation because they think it is the same as debt counselling, and they fear the implications of debt counselling.
To clear up this confusion and worry, you need to know that there are three ways you can deal with over-indebtedness, depending on your situation.
- Debt consolidation
- Administration order
- Debt counselling
All three of these processes or solutions are designed to help consumers get control of their debt, but they do it in different ways.
The most important differences between the 3 processes are:
Legal protection: Debt counselling and an administration order are both legal processes that protect you against your creditors. You must be over-indebted to qualify for debt review or an administration order. A magistrate or a debt counsellor decides if you qualify or not. Debt consolidation is not a legal process and therefore does not give you legal protection. However, because your debts are settled with the consolidation loan, creditors will no longer have a reason to take action against you.
Debt counselling and an administration order have fees attached to them, whereas the process of debt consolidation is free. You don’t pay for Bayport to negotiate settlement discounts with your creditors or to settle your debts with the consolidation loan. You only pay the usual fees and interest on the consolidation loan.
With debt counselling and an administration order you cannot get any further debt
while the process is running. With debt consolidation you can get more debt if your credit score is good enough.
When should you consider debt consolidation?
- When you have multiple loans and you cannot keep up with the repayments.
Consolidation means that you take out one big loan to settle all the smaller loans. You then have only one monthly payment, which is lower than the combined repayments on your many loans.
You also save on monthly fees and bank costs, and because of Bayport’s partnership with your employer, you get your consolidation loan at a fixed interest rate that is lower than what you would usually qualify for.
As part of the process, Bayport negotiates settlement discounts with your creditors, which decreases your total debt.
When should you consider an administration order?
- When you cannot meet your financial commitments.
- When your debt is less than R50 000.
- When you need legal protection from your creditors.
- When you do not qualify for a consolidation loan due to over-indebtedness and a poor credit score.
Because of the fees involved, and the very long time it takes to pay your creditors, your debt can continue to increase under an administration order.
When should you consider debt counselling?
- When you run the risk of losing your assets, ie, the bank threatens to repossess your home, vehicle or other assets you have. While you are under debt counselling, and even in the 60 days while your review application is being considered, your creditors cannot take action against you.
- When you are too indebted to qualify for a debt consolidation loan.
Debt counselling should always be your last resort because you cannot exit the process until you have cleared your debts and received a clearance certificate. This can take a very long time.
There is a lot more detail available on these three debt solutions, but for now we just want you to know that:
- You have options to fix your debt problems – educate yourself before you decide.
- Debt counselling, an administration order and debt consolidation are very different – get the facts before you decide.
- You can talk to Bayport Money Solutions about your options before you decide – you know us and what we can do for you.