Are you Over-Indebted? Here's what you can do about It
South Africans have a complicated relationship with debt. Many South Africans are working hard, earning a decent income, and still somehow finding themselves with less money at the end of the month than they started with. According to FinMark Trust's FinScope Consumer Survey 2024, an estimated 12 million South African adults are over-indebted, making it a sizeable problem across the nation.
If that sounds familiar, you're not alone, and it’s certainly not where you’d intended to end up. It’s just one of those adulting things that tends to sneak up on you.
Being in debt over your head isn't a reflection of poor choices or a character flaw. Usually, it's what happens when the cost of living outpaces income growth, when a retrenchment hits at the wrong moment, or when the weight of supporting a household quietly compounds over years. Your Car Insurance, house bond, Medical Aid, petrol, groceries, school fees, House Insurance and more all add up. It's a financial situation, and like most financial situations, there are practical steps you can take to address it.
What does "over-indebted" mean?
The National Credit Act defines over-indebtedness as a state in which your monthly debt repayments are so significant that you genuinely struggle to meet your financial obligations. Some common indicators include:
- Using one credit card to cover payments on another
- Paying only the minimum amount due every month
- Receiving letters of demand or calls from debt collectors
- Skipping payments entirely to cover basic living expenses
- More than 30% of your take-home pay going towards debt repayments alone
What can you do about it?
For many people, this is the point where the options start to feel overwhelming. That reaction makes complete sense. There's a lot of conflicting information out there, and some of the choices carry real consequences worth knowing about upfront. Here's a straightforward breakdown:
| Option | What it involves |
|---|---|
| Debt consolidation | Taking out a new loan to combine existing debts into one payment |
| Debt Counselling | A formal, legally regulated process to restructure what you owe |
| Budgeting | Cutting unnecessary expenses and tackling debt independently |
Debt Consolidation vs. Debt Counselling: what's the difference?
These two are confused constantly, so it's worth unpacking both.
Debt Consolidation means taking out a new loan to pay off your existing debts, leaving you with one monthly payment instead of several. The catch is that you need to qualify for that consolidation loan, and if your finances are already stretched, approval isn't guaranteed.
Debt Counselling is a different process altogether. It's a formal, regulated mechanism under the National Credit Act. A registered debt counsellor reviews your full financial picture, negotiates with your credit providers on your behalf, and restructures your debt into a single, reduced monthly payment that your income can realistically support. During this time, you are considered “under debt review” and cannot take out further loans or credit. Importantly, once you're formally under debt review, your credit providers can't take further legal action against you during the process.
How does being under debt review impact your credit score?
Your credit profile will reflect that you're under debt review for the duration of the process, meaning you won't be able to access new credit during that time.
Realistically, if you're already missing payments or defaulting on accounts, your credit score is likely already under pressure. Debt Counselling provides a structured, legally protected path back to financial stability. Once you complete the process and receive your clearance certificate, the debt review flag is removed from your credit profile entirely.
What are the disadvantages of Debt Counselling?
- You can't take on any new credit while under debt review
- The process takes time, typically several years depending on your overall debt load
- There are regulated fees involved, explained before you commit to anything
- It requires consistent commitment. Stopping payments or abandoning the process early can expose you to legal action from creditors because the legal protections debt review provides only hold while you remain in the process.
How much does Debt Counselling cost?
Fees are regulated by the National Credit Regulator and are structured into your reduced monthly repayment plan. There are no surprise upfront costs, and a registered debt counsellor is required to explain the full fee structure before any agreement is signed.
Taking that first step
If any of this resonates, the most useful thing you can do right now is get proper, impartial information before making any decisions. Hippo's Debt Counselling comparison tool helps you compare rates between different NCR-accredited debt counsellors who can assess your individual situation and walk you through your realistic options.
No pressure. No judgement. Just clarity when you need it most.
NOTE: This article is for informational purposes only and should not be construed as financial or legal advice. Debt counselling eligibility, fees, and timelines vary depending on individual circumstances. Always consult a registered debt counsellor before making any decisions.
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