The National Debt Counselling Association says debt counselling remains one of the most effective ways for over indebted consumers to protect their assets and regain financial stability.
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South African households are facing mounting financial pressure as rising interest rates, inflation and increasing living costs continue to erode disposable income, prompting debt experts to call for greater awareness of debt counselling as a practical solution for struggling consumers.
The latest increase in the repo rate by the Monetary Policy Committee has added to the burden facing many households. In late May, the MPC raised the repo rate by 25 basis points to 7%, pushing the prime lending rate to 10.5%.
The decision was driven by inflation concerns, geopolitical risks linked to conflict in the Middle East and fears that rising costs could become entrenched in the economy.
According to National Debt Counselling Association chairperson René Moonsamy, the current environment is leaving many consumers increasingly vulnerable.
“Many households were already struggling to balance the rising cost of living and debt repayments. For people with variable rate debt such as home loans, vehicle finance and personal loans, a cycle of rising interest rates, as the Reserve Bank tries to curb inflation, could be the proverbial straw that breaks the camel’s back,” she said.
Moonsamy said debt counselling remains one of the most effective tools available to consumers who need to restructure their debt while protecting important assets such as homes and vehicles.
National Debt Counselling Association chairperson René Moonsamy
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Debt counsellors are able to negotiate reductions in interest rates on unsecured debt, including personal loans, where necessary. These adjustments can significantly reduce financial strain and free up income to help consumers meet their obligations and rebuild financial stability.
Despite these benefits, Moonsamy said several misconceptions continue to discourage South Africans from seeking assistance.
One of the most persistent myths is that entering debt counselling reflects poor financial management or personal failure.
Moonsamy argues the opposite is true.
“When faced with mounting financial pressure, and potentially the risk of having a home or car repossessed, debt counselling is a reasonable step to take. It allows people to honour their obligations in a structured, affordable way.”
She added that consumers who enter debt counselling are taking responsibility for their finances rather than avoiding their debts.
“People in debt counselling have done the responsible thing by choosing to pay their debt instead of running away from it.”
Another common misunderstanding is that consumers lose control over their finances once they enter the process.
Moonsamy explained that debt counsellors conduct confidential financial assessments to determine affordability and then negotiate repayment plans with creditors on behalf of clients.
Consumers remain involved throughout the process and continue receiving support and advice from their debt counsellor.
“The debt counsellor will conduct a confidential assessment to determine whether debt counselling is an appropriate solution and the amount the applicant can realistically repay each month. They then negotiate with creditors and develop an affordable repayment plan,” she said.
Many consumers also fear that debt counselling permanently damages their ability to obtain credit.
While consumers cannot apply for new credit while under debt review, Moonsamy said the restriction is temporary.
After completing the process and receiving a clearance certificate, the debt counselling status is removed from their credit profile in accordance with the National Credit Act.
“Many emerge from the process in a stronger financial position because they have addressed unsustainable debt levels, established healthier financial habits and can rebuild their credit profiles, giving them access to more financial products at better interest rates,” she said.
Moonsamy also challenged the perception that debt counselling is designed only for low income consumers.
She explained that debt counselling is available to anyone who is over indebted or at risk of becoming over indebted, provided they have an income source to support repayments.
“Most consumers who use debt counselling successfully are middle and upper income earners who have unsustainable levels of debt, although there is no minimum income or debt levels required to join debt counselling. Rather, the ratio of debt over income is what is key.”
The National Debt Counselling Association estimates that as many as three million South Africans could benefit from debt counselling but remain hesitant because of outdated assumptions and misinformation.
Moonsamy believes the current economic environment makes it more important than ever for consumers to seek help before financial challenges spiral out of control.
“The reality for South Africans is that salaries do not keep up with rising interest rates and inflation. Debt counselling provides a structured way to restore affordability, protect consumers from spiralling debt and ensure creditors are repaid.”
“Seeking help if you need it is a sustainable, responsible way to protect long term financial wellbeing,” she said.
The National Debt Counselling Association, established in 2017, represents some of South Africa’s largest debt counselling firms and says its members account for approximately half of the country's debt counselling sector.
The association aims to improve industry standards while helping consumers better understand the benefits of debt counselling.
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