South Africa’s relationship with debt is at a critical tipping point. The TransUnion report reveals a growing trend: more consumers are proactively seeking help before their financial situation becomes unmanageable. Debt counselling inquiries rose by 8% over the course of 2024, and the use of online debt management tools increased by 9%, signalling a clear shift in consumer behaviour. As more South Africans battle mounting financial pressures, they are turning to structured debt solutions like never before. Yet, despite this growing awareness, several persistent myths continue to create confusion and prevent many from seeking the help they need

Myth 1: Debt Counselling Permanently Damages Your Credit Record

A prevalent belief is that entering debt counselling irreparably harms one's creditworthiness. In reality, while undergoing debt counselling, your credit profile is flagged to indicate the process. This flag restricts access to new credit during the counselling period, ensuring consumers focus on repaying existing debts. Upon successful completion and issuance of a clearance certificate, this flag is removed, allowing individuals to rebuild their credit profiles.

Myth 2: Debt Counselling and Debt Consolidation Are Identical

Though both aim to manage debt, debt counselling and debt consolidation differ fundamentally. Debt consolidation involves taking a new loan to pay off existing debts, potentially leading to more debt if not managed properly. Conversely, debt counselling restructures existing debts into a manageable repayment plan without additional loans, offering legal protection against creditors.

Myth 3: Only Those in Severe Financial Distress Need Debt Counselling

Debt counselling isn't reserved solely for individuals facing financial ruin. It's a proactive measure for anyone struggling with debt repayments, regardless of the amount owed. Whether over-indebted by R50,000 or R900,000, consumers have the right to seek assistance through debt counselling. In fact, South Africans now spend on average 68% of their take-home pay servicing debt.

Myth 4: Debt Counsellors Are Solely Profit-Driven

Some believe that debt counsellors prioritize profit over client welfare. However, in South Africa, debt counselling fees are regulated by the National Credit Regulator (NCR). Payments are managed by registered Payment Distribution Agencies (PDAs), ensuring transparency and fairness in the process. PDA for short is an entity described in the National Credit Act and has the mandate to collect funds from consumers who are in the debt counselling process and then distribute those funds to the consumer’s credit providers. Various reports indicate that more consumers trust the regulated process and are turning to it for ethical and legal support.

Myth 5: Debt Counselling Means Losing Your Assets

Entering debt counselling provides legal protection against asset repossession. Once under debt review, creditors cannot take legal action against you, safeguarding assets like your home and car, provided you adhere to the agreed repayment plan. This legal protection is crucial at a time when the median debt-to-annual income ratio sits at 113%, highlighting the growing pressure on consumers’ finances

Myth 6: Debt Counselling Takes an Excessive Amount of Time

The duration of debt counselling varies based on individual circumstances. While it may extend the repayment period to make monthly payments affordable, consumers can expedite the process by making additional payments when possible. Given that unsecured debt levels are now 29% higher than in 2016, and 60% higher among those earning more than R35,000, spreading payments over time is often necessary for sustainability and financial recovery.

The Reality: Debt Counselling Offers Tangible Benefits

Beyond debunking the myths, it's crucial to understand the real and significant advantages that debt counselling provides. One of the most important benefits is legal protection. Once a consumer is placed under debt review, creditors are legally prohibited from initiating any legal proceedings, such as repossession or garnishing wages. In addition, debt counselling simplifies financial obligations by consolidating all debts into a single, affordable monthly payment. This approach not only eases the stress of managing multiple repayments but also brings structure to one’s financial planning. Over time, this process supports financial rehabilitation, helping individuals develop healthier financial habits and equipping them with the tools to make informed decisions long after the debt review is completed.

Initiatives like FinFix, a debt counselling and financial education firm, play a vital role in supporting South Africans on this journey. Through resources and access to expert guidance, FinFix empowers consumers to make informed decisions, understand their rights, and navigate debt responsibly.