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Tom writes:
What happens when you cancel debt review? Do you still have to pay for a lawyer?
City Press replies:
If you have settled all your debts, then you can get a letter from your debt counsellor and the debt review is terminated.
However, if you wish to cancel the debt review before your debts are finalised, you can only do so if you are able to prove affordability and that you can meet the repayments.
You have to go to court to cancel the debt review.
That means you have to hire a lawyer, which costs in the region of R2 500 to R3 500.
If the case is opposed and goes to the high court, that could set you back around R9 000.
Russell Dickerson of RD Debt Counselling recommends you conduct a cost analysis first.
If your debt review did not include a negotiation to reduce interest rates, there may be a financial argument to leave debt review as you will not be paying a debt review fee.
However, you also need to take the legal fees into consideration.
If your debt review agreement qualified you for lower interest rates and the removal of the service fee, then it may not make sense to cancel the review.
This is because the original interest rates will apply and your instalments will increase significantly.
You will be paying more interest for no reason.
Dickerson says if you are benefiting from a reduced interest rate and can afford to pay more than the court order each month, rather pay off the debt review in less time and still benefit from the lower interest rates.
Dickerson says in his practice he encourages his clients to use any extra income to pay an additional amount into their assets such as a house and car.
These do not have the same interest rate reduction under debt review as short-term, unsecured debt.
“This is twofold, it gets them out of debt review more quickly, their assets are still protected and, if they have a hiccup, they are ahead on their payments.”
Why do I have to cancel my existing bond to buy another house?
Gregory writes:
I had a paid-up property and kept the bond “open” just in case I needed money for an extension or for my son who is at university.
I purchased a new house and the bond originator helped me get a bond from a bank.
However, the bank demanded a cancellation of the bond on my other property before they could register the new bond.
Why is that?
City Press replies:
Although you may not currently be using your access bond, it remains a line of credit and is taken into consideration in the case of an affordability assessment.
The bank will consider whether or not you can afford two bonds.
If not, you will have to cancel one.
This is important when it comes to any credit lines.
While having credit available and not maximising it may reflect positively on your credit record, access to too much credit could affect your ability to open new credit lines.
