Under Debt Review and need a Loan Urgently? South Africa

By Princella Esther Agyei Certified Credit Counselor & HR Manager, HR People Associates
A car breaks down, a medical issue arises, or a family crisis occurs, and suddenly you’re thinking, “I’m under debt review and I need a loan urgently.”

It’s a stressful and difficult position to be in. You’re working hard to pay off old debt, but a new, immediate need for cash has appeared. Can you apply for new credit? Is it even possible?

This guide will give you the honest, straightforward truth about applying for a loan while under debt review in South-Africa. We will explain the legal realities, the risks involved, and what you should consider before making any decisions.

The Legal Reality: Why It’s So Difficult

The National Credit Act (NCA) is designed to help over-indebted consumers, but it’s also designed to prevent them from falling deeper into a debt trap. When you enter debt review, a flag is placed on your profile at all the credit bureaus.

This flag serves as a clear signal to all registered credit providers that you have been legally declared “over-indebted.”

According to the NCA, it is illegal for a credit provider to knowingly grant new credit to a consumer who is under debt review. Doing so is considered “reckless lending.” This is the primary reason why mainstream banks like FNB, Absa, Standard Bank, and Capitec will automatically decline your application for a loan, a credit card, or any form of new credit.

The Big Question: Are There Any Exceptions?

This is where the situation gets murky. While the law is clear, some smaller, specialist credit providers may operate in a grey area. You might see adverts from lenders who claim to offer loans to people under debt review.

• Understanding the Risk: These lenders often charge extremely high-interest rates and fees to compensate for the high risk they are taking on.
• The “Letsatsi Loan” Example: Companies like Letsatsi are often mentioned in these searches. They are registered credit providers, but any loan offered to someone under debt review would come with significant costs and could potentially complicate your existing debt review agreement.
• Impact on Your Debt Review: Taking on new debt without declaring it to your Debt Counsellor can jeopardise your entire debt review plan. If your budget changes and you can no longer afford your restructured payments, the original credit agreements could be reinstated, leaving you exposed to legal action from your creditors.

The Most Important Step: Talk to Your Debt Counsellor First

Before you even consider applying for a new loan, your very first and most important action should be to contact your Debt Counsellor.

They are your single most valuable resource. Explain your emergency and your financial pressure. They can help you by:

1. Re-assessing Your Budget: They can go through your budget with you to see if there is any room to free up cash for your emergency without taking on new debt.
2. Communicating with Creditors: In some rare cases, they may be able to negotiate a temporary “payment holiday” or a brief reduction in your payments to help you through a short-term crisis, although this is not guaranteed.
3. Providing Professional Advice: They can give you sound, unbiased advice on your best course of action, protecting you from making a rash decision that could harm you in the long run.

Safer Alternatives to Taking a New Loan

If you urgently need cash, consider these options before looking for another loan:

• Family and Friends: While it can be difficult, asking for a small, interest-free loan from a trusted family member or friend is often a much safer option.
• Selling Unwanted Items: Selling items of value that you no longer need can provide a quick cash injection.
• Negotiating with the Service Provider: If the emergency is a specific bill (like a medical or repair bill), try contacting the service provider directly to see if you can arrange a payment plan.

Conclusion: Protect Your Progress

The feeling of needing a loan urgently while under debt review is incredibly tough, but it’s crucial to protect the progress you have worked so hard to achieve. Taking on new, high-interest debt can be like trying to put out a fire with gasoline.

The “debt review” flag on your name is not a punishment; it’s a protection. It’s a shield designed to help you recover without being buried under a new mountain of debt. Trust the process, lean on the expertise of your Debt Counsellor, and explore safer alternatives. Your financial future is worth protecting.