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The pros and cons of debt counselling

(Updated: 29 September 2023)

When we think of debt counselling, we are often overwhelmed by feelings of dread. With terms like debt consolidation, or debt settlement being thrown around, the idea of undergoing counselling may be confusing and feel like a daunting task. By not fully understanding the pros and cons around debt counselling or knowing what to expect during the debt review process, many South Africans’ continue to struggle rather than seek guidance.

In this article, we will take a look at what debt counselling is and the pros and cons behind debt counselling to better equip you, should you need to undergo debt counselling at any point in your life.

What is Debt Counselling?

Debt counselling is a key component of debt rehabilitation and is a crucial term in the debt review process. Debt counselling is intended to assist over-indebted consumers struggling with debt through budget advice, negotiation with credit providers for reduced payments, and restructuring of debts.

Over-indebtedness occurs when a person is unable to meet their financial obligations in a timely manner or where total debt repayments exceed their net income, especially after living expenses have been met.

What are the Pros of Debt Counselling?

There are several pros to choosing debt counselling, such as:

  • Your assets are secured, and legal action is prevented: Debt counselling is the process that determines whether you qualify for debt review or not. During this period, credit providers are unable to pursue any legal action against you.
  • No permanent record will be kept: Once you are deemed over-indebted and qualify for debt review, this information is listed on your credit record. However, once you complete the process, the listing against your name is removed from every consumer credit bureau database.
  • Receive professional financial guidance: A debt counsellor is trained to assess and provide personalised advice based on your current financial situation. They can therefore help you create a budget, negotiate with creditors, and develop a debt repayment plan.
  • Managing the debt consolidation process: Debt counselling often involves consolidating multiple debts into a single monthly payment, making it easier for you to manage your finances and track your progress.
  • Lower interest rates on your debts: In some cases, debt counsellors can negotiate with creditors on reduced interest rates on your debts, thus lowering the overall amount owed.
  • Gaining creditor cooperation: Creditors are typically more willing to work with debt counsellors, which can lead to reduced fees, waived penalties, and more favourable repayment terms.
  • Learning how to manage your finances better: Debt counselling services often provide financial education and resources to help you make better financial decisions in the future, promoting long-term financial stability.
  • Avoiding bankruptcy: With debt counselling, you can avoid declaring bankruptcy, which can have detrimental, long-lasting consequences on your credit score and financial future.

What are the Cons of Debt Counselling?

There are several cons to choosing debt counselling, such as:

  • Additional cost additions: Some debt counselling companies may charge for their debt counselling services and financial assistance. It is important to note that whilst these fees are generally regulated, they still add to your overall debt burden.
  • Negative impact on your credit score: Participating in a debt counselling program will have a negative impact on your credit score and your profile will be flagged by the consumer credit bureaus. However, as you make consistent repayments, your score will improve over time.
  • Limited debt types counselling: Debt counselling primarily focuses on unsecure debts, like credit cards or medical bills. Secured debts, like mortgages or car loans, may not be covered in the program. Do your research when looking for a debt counsellor to help you.
  • Dedication to the process is a must: Debt counselling programs require you to be committed to the process and strictly follow the agree-upon repayment plan. Failure to do so can result in more financial trouble.
  • Time and patience: The debt counselling process isn’t something that is completed within a day or two. It takes time to negotiate with creditors, establish a repayment strategy, and pay off your debts. During this period, you may need to make significant lifestyle changes to meet your financial obligations without incurring more debt.
  • No new credit allowed: During the debt counselling process, it will be ill-advised to consider taking on new debt. A debt consolidation loan may appear tempting, but further review may be required to determine the long-term pros and cons.
  • Beware of potential scams: Not all debt counselling companies are reputable. People searching for debt counselling can easily fall prey to scams presented by phony or “too-good-to-be-true” debt counselling agencies. Be sure to do your due-diligence when choosing a debt counselling company.

Make Informed Decisions

Before running off to get a debt counsellor to help you manage your debt, it may be worth your time to request your credit report. Viewing your credit report can give you enough insight into your current debt situation and allow you to see how that debt is affecting your credit score. You will then be able to make an informed decision regarding debt counselling and where you should apply for it or not.


Easily gain access to your personal credit report using a valid South African ID number with our My Credit Check service. Whether you are a first-time credit report user or not, My Credit Check will help you understand your credit data, show you how to monitor accounts, manage debt, and improve your credit profile.

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