When you're drowning in debt, it can be hard to know which solution is right for you. Two of the most common options in South Africa are debt review (debt counselling) and debt consolidation. While they may sound similar, they work very differently — and choosing the wrong one can cost you time, money, and even your assets.
What Is Debt Review?
Debt review is a legal process regulated by the National Credit Act (NCA). A registered debt counsellor assesses your finances, negotiates reduced interest rates with your creditors, and presents a restructured repayment plan to the court. Once approved, you make one affordable monthly payment through a Payment Distribution Agency (PDA).
During debt review, your assets are legally protected from repossession, creditors cannot harass you, and you cannot take on any new credit. The process typically takes 3 to 5 years, after which you receive a clearance certificate.
What Is Debt Consolidation?
Debt consolidation involves taking out a single, new loan to pay off all your existing debts. Instead of paying multiple creditors, you make one payment to the consolidation lender. The idea is to simplify your payments and potentially get a lower overall interest rate.
However, debt consolidation is not a legal process. It does not offer legal protection, and you need to qualify for the new loan — which is often difficult if your credit score is already poor. You also remain free to take on new credit, which can lead to even more debt.
Side-by-Side Comparison
| Feature | Debt Review | Debt Consolidation |
|---|---|---|
| Legal protection from creditors | Yes — under the NCA | No |
| Asset protection (car, house) | Yes — cannot be repossessed | No — creditors can still act |
| Reduces interest rates | Yes — negotiated down significantly | Sometimes — depends on loan terms |
| Credit check required | No | Yes — good credit usually needed |
| Can take new credit | No (during process) | Yes |
| Upfront fees | No — fees included in payment | Yes — loan initiation fees |
| Regulated process | Yes — NCR and NCA | No — standard lending |
| Risk of more debt | Low — no new credit allowed | High — can still borrow |
| Court order | Yes — legally binding | No |
| Creditor harassment stops | Yes — legally required | No |
When Should You Choose Debt Review?
Debt review is the better option when:
- You are over-indebted and cannot afford your monthly debt repayments after covering basic living expenses
- You are at risk of losing your car or home due to missed payments
- You are being harassed by creditors or receiving legal threats
- You have a poor credit score and cannot qualify for a consolidation loan
- You want legal protection while you repay your debts
When Might Debt Consolidation Work?
Debt consolidation may be suitable when:
- You have a good credit score and can qualify for a loan at a lower interest rate
- You are not over-indebted — you can afford your repayments but want to simplify them
- You have the discipline not to take on additional debt after consolidating
- You do not need legal protection from creditor action
The Danger of Debt Consolidation
The biggest risk with debt consolidation is the debt trap cycle. Because consolidation does not prevent you from taking new credit, many consumers end up with the consolidation loan plus new debts — leaving them worse off than before.
Studies show that a significant percentage of people who take consolidation loans end up accumulating more debt within two years. Debt review eliminates this risk by legally preventing new credit applications during the process.
The Bottom Line
If you are seriously struggling with debt, creditors are threatening legal action, or you are at risk of losing your assets, debt review is the safer, more protective option. It is specifically designed for people who are over-indebted and provides the legal protection that debt consolidation simply cannot offer.
Frequently Asked Questions
Can I switch from debt consolidation to debt review?
Yes. If a consolidation loan is not helping you manage your debt, you can apply for debt review. The consolidation loan itself will be included in your debt review plan, along with any other outstanding credit agreements.
Which option is cheaper?
Debt review fees are regulated by the NCR and included in your restructured payment — there are no upfront costs. A debt consolidation loan may have initiation fees and service fees. In the long term, debt review often results in lower total interest paid because interest rates are negotiated down significantly.
Can I get a consolidation loan if I have bad credit?
It is very difficult to qualify for a consolidation loan with a poor credit record. Most lenders require a reasonable credit score. Debt review, on the other hand, is specifically designed for people who are already over-indebted and does not require a credit check.
