Loans for people under debt review (Read this first)

How can somebody under debt review get a loan? Is a loan under debt review legal? What should I do if I need a loan while under debt review? 

There are so many questions about getting a loan when under debt review and if a loan has any impact on successfully completing the debt review process. 

Don’t worry, though! We have all the answers you need in this blog.

Side note: Not that familiar with debt counselling (debt review)? Start by reading through these posts first:

1. What is debt counselling?
2. What is debt review?
3. The advantages and disadvantages of debt counselling (debt review)
4. How debt review (debt counselling) works

 

Can I get a loan while under debt review?

No. While under debt review, you undergo a ‘credit freeze’, which restricts your access to credit. 

The credit freeze is put in place to protect you from accumulating any further debt while under debt review. You are also noted by credit bureaus as being under debt review and therefore, they cannot lend you any additional credit.

 

 

The purpose of debt review is to support over-indebted South Africans struggling with debt. The process makes it easier to repay what is owed by lowering monthly repayment terms and offering legal support and protection. 

This can be compromised if you accept new credit, such as a loan, and puts you at risk of falling deeper into debt.  

It is important to note that undergoing a credit freeze is not the same as being blacklisted. When you are officially under debt review, creditors are notified of your debt review status. This does not mean you are now blacklisted. 

Let’s explore this a little further.

 

 

What does being ‘blacklisted’ mean? 

Here is a quick comparison between debt review and being ‘blacklisted’ before we dive in: 

Debt review vs being ‘blacklisted’
Debt review	‘Blacklisted’
While under debt review, you undergo a ‘credit freeze’, which restricts your access to credit. The credit freeze aims to protect you from accumulating additional debt. You are also noted by credit bureaus as being under debt review and therefore, they cannot lend you any new credit.	If somebody is ‘blacklisted’, it means they most likely have; a poor credit record; are unlikely to repay debt; and/or showcase risky credit behaviour.    There is no actual list where your name is kept. Creditors are able to share your credit history on your report for others to see, and they can theoretically ‘blacklist’ you if you have an unfavourable credit history.

 

When someone is deemed ‘blacklisted’, it means that they have a very poor credit record, are unlikely to repay their debt, and therefore present a risk to lenders.

There is no actual list where your name is kept, but rather a record of your credit behaviour on your credit report. Creditors are able to share your credit history (good and bad) on your report for other credit providers to see.

 

 

If you have a history of negative credit behaviour, creditors can theoretically ‘blacklist’ you.  

The type of information recorded on your credit report includes the following: 

• How often you make debt repayments
• How often you take out credit and how long take you take to repay it 
• How often you cancel credit cards 
• If you have co-signed a credit agreement

 

Your credit report can be accessed easily – you can request a copy from a registered credit bureau or Credit report platforms in South Africa, such as My Score Hero, TransUnion, XDS or Experian.

Here is some good news, you can always work on building a healthier credit score and credit report. Here are a couple of things to keep in mind when trying to do that: 

• Check your credit report regularly for inaccurate information 

• Balance your credit with secured and unsecured debt 

• Be conscious of how often you take out credit 

• Pay all your debts on time and as equally as possible 

• Do not cancel your credit cards too often 

• Be cautious of co-signing debt

 

 

How to get a loan under debt review

Most ethical and registered creditors will be reluctant to offer credit (such as a loan) while someone is under debt review (it is part of their responsibility as registered credit providers to help over-indebted South Africans.)

On the other hand, you may encounter unethical creditors trying to sell you a loan regardless of your debt review status. 

Try to avoid them at all costs. This is considered reckless lending and may get you in trouble. 

They will try to sell you credit under the guise that you will not get caught by the NCR or that it will not impact your debt review. Be careful. Most of these lenders aren’t registered credit providers (meaning they aren’t registered with the NCR), charge high-interest rates on loans and unethically provide loans to those they know can’t afford to pay them back.

 

Things to watch out for

Not sure how to spot these unethical creditors? Look out for sales messages like:

‘Under debt review or have bad credit? Get a loan!’ or;

‘Need an instant loan? Apply now! No credit check required.’

Debt review is meant to help you safely overcome your debt, and taking credit from unethical lenders can cause you to forfeit debt review. 

But what happens if you desperately need a loan while under debt review? 

 

What you can do if you need a loan while under debt review

Here’s what you can do if you’re looking for a loan while under debt review.

1. Contact your debt counsellor immediately
2. Work overtime or pick up a side hustle 
3. Buckle down and complete debt review as soon as possible

 

Contact your debt counsellor immediately 

Get in touch with your debt counsellor as soon as possible and notify them of your predicament. They may be able to help you create an effective monthly budget to help re-allocate savings and expenses or take your case to the Court with proposed amendments to your repayment plan. 

Note that this process may be denied and result in additional legal fees. 

If you would like to learn more about all the costs associated with debt review, we have a full debt counselling fee breakdown post that you can go through. 

 

Work overtime or pick up a side hustle  

Consider working overtime at your job or starting a side hustle to earn some extra money. Although easier said than done, this is your best (and safest) option!  

 

Buckle down and complete debt review as soon as possible

Once you complete the debt review process, you are issued a clearance certificate (also known as form 19) that confirms your completion of debt review.

With this certificate in hand, you will be able to access credit once again and can use it to take out a personal loan.

 

The problem with loaning money while over-indebted

We all want to enjoy a debt-free lifestyle, but sometimes we face tricky financial circumstances that push us into a debt spiral.

What exactly is a debt spiral?

 

 

It’s a situation where you fall deeper and deeper into debt because you are unable to meet your repayment obligations and become over-indebted. 

This can sometimes happen if you unexpectedly lose your job, have high-interest debt or need to borrow more money than you originally planned (such as for an emergency). 

As an over-indebted individual, debt review has been designed to assist you in overcoming your debt. However, as mentioned earlier in the post, you run the risk of compromising the success of the debt review process if you take out a loan and fail to make repayments. 

This in turn, may make your financial situation a lot worse as you will no longer have protection from creditors nor from having your assets repossessed. 

Another thing to consider is that such unethical creditor businesses are most times not registered with the NCR, and if something goes wrong, they may not be able to offer you assistance or adequate protection. 

 

Closing remarks 

At the time of needing a loan, you may feel desperate and not sure what to do. However, do not let the ‘quick-fix’ solution of taking out a loan tempt you to make decisions you will regret later on. 

It is no secret that debt review requires steadfast determination and commitment, but the rewards are so worth it in the end! 

Thousands of South African consumers complete debt review every year. If you believe it is the best option for you when it comes to addressing your debt, or you need help taking the first few steps towards achieving debt freedom, do not hesitate to contact our friendly team.