Debt review is a powerful tool for genuinely over-indebted consumers, but it comes with real disadvantages.
• No access to new credit: while under debt review, Section 88 of the NCA prevents you from entering into any new credit agreement. No loans, credit cards, store accounts, vehicle finance, or home loans for the entire duration of your debt review period, which can be many years.
• Long repayment period: because monthly payments are reduced to what you can afford, the total repayment period is extended. What might have taken 5 years to repay at the original rate may take 10 or more years under the restructured plan.
• Debt review fees: application fee, restructuring fee, after-care fees, and legal fees are added to your repayment obligations and must be paid before full debt clearance is possible.
• Debt review flag on credit profile: the flag appears from the moment your application is submitted and remains until formal removal. This affects your creditworthiness for the entire period.
• Cannot exit easily: once under debt review with creditors notified, you cannot simply cancel it. A formal legal process is required to exit, which takes time and money.
• Lifestyle restrictions: the reduced repayment plan is calculated on a strict budget that accounts for your basic living expenses. There is typically limited room for discretionary spending.
• Debt counsellor dependency: you are reliant on your debt counsellor to manage your plan correctly, communicate with creditors, and eventually issue your clearance certificate. A poor or deregistered debt counsellor can leave you in a difficult position.
NDRC provides an honest assessment of both the advantages and disadvantages of debt review before you apply. If debt review is not the right solution for your situation, we will tell you and discuss alternatives.