The short answer here is that you cannot get a loan while under debt review, for the simple reason that while under debt review your credit profile will be flagged across all credit bureaus, and this will prevent responsible lenders to approve your loan application, once they know that you are currently over-indebted and in debt review because you are struggling to repay your debts already. Whenever one applies for a loan, it’s mandatory for reputable creditors to check your credit history before proceeding with your application. If they work alongside the NCA and NCR, they will reject your application immediately upon seeing your credit status.
As stated by the National Credit Act (NCA), should a bank or creditor approve a loan application from a debt review candidate, they are guilty of reckless lending. The NCA states no one under debt review is eligible for further loans until they have completed the debt review process and are no longer over-indebted.
Unscrupulous Lenders
The National Credit Act governs the debt review process, with the National Credit Regulator enforcing this process. The NCA does specify that consumers under debt review are prohibited from applying for loans while they are still over-indebted. One won’t be able to safely apply with a registered lender, meaning that the lenders who are left and are likely to grant loans under these circ*mstances are loan sharks.
Loan sharks don’t operate under the necessary regulations and in a sense are outside of the law. They won’t be governed by the NCA nor regulated by the NCR, so the protection offered compared to that of being under review is nil. Sharks will offer you high interest short term loans for a quick fix, resulting in interest rates building and your paying much more than originally borrowed.
Going under debt review is an important life-altering decision a consumer has to make, and it’s often very difficult for consumers under debt review to adjust to their new lifestyle of spending only the money that they have, and not relying on credit anymore. There is a temptation with many consumers to want to quickly exit their debt review and return to living on credit to keep up with living outside means and maintaining a certain lifestyle. Desperation can be a reason consumers reach out to loan sharks for loans while under debt review, the struggle can be immense for some people, but making this mistake could mean putting their entire financial future at risk.
Big Promises for Quick Fixes – Unscrupulous Salespeople
Occasionally consumers under debt review will be approached by salespeople willing to offer them credit, as long as they are able to exit their review. This is a reckless course of action as these salespeople are not acting according to the NCA or NCR and are interested only in their commissions. Because of this, they are likely to not be fully aware of all the legal implications for you. By leaving debt review under this advice means you are effectively digging yourself a larger debt hole, one from which you might never break free.
Big Promises for Quick Fixes: Credit Provider Collections Agents
These folks might be working directly for a reputable credit provider, but it is highly likely they are an agent for an external collections attorney. They may ask how you are planning on dealing with your existing debt, and offer a better repayment deal with smaller monthly repayment amounts. Agents working like this won’t be fully aware of the other credit providers involved in your debt review plan, or care about them for that matter, and importantly, they may not consider that paying smaller amounts each month is not necessarily better in the long term for the consumer. They may suggest you leave debt review in order to be able to apply for the cheaper, ‘better’ deal, which we now understand is not possible until the process is completed.
The issue with an offer like this is the now extended time span. The consumer faces the risk of falling into bad habits or repayment problems while trying to settle their debt along the way. The consumer is left exposed to their debt for longer, and may end up accumulating interest over time due to fees and/or bad rates that the agent fails to disclose.
It’s rare such an agent will put your offer in writing, and anything not in writing when it comes to managing your finances is frankly irresponsible, for example, should the consumer leave their debt review and waive their protection rights as a result, they are left with no actual record of the ‘better’ offer they were pitched. The consumer is left without assistance, almost a sitting duck waiting for creditors to pounce. You might have exited your debt review on this advice, then once ready to accept the “better” offer, be told it would be considered reckless lending to grant the deal.
Check with your debt counsellor if you are able to include in your debt review the deal offered by the agent, leaving you still protected under the process.
‘Leaving debt review for the benefits offered by a single credit provider is foolish’ – Debt Free Magazine
The benefits of being under debt review are totally lost once you leave – hence why it is plain foolish to leave for the potential, not confirmed, benefits extended to you by a sole creditor. Other creditors on your court order may now choose to take legal steps against you to collect their debt as the protection offered by debt review is no longer your safety blanket.
You will Not Qualify for a Loan Under Debt Review Anyway
Your credit profile will be flagged until you have completed your court ordered debt review; it is not sufficient to just tell your counsellor you are leaving, and this won’t change your credit status. Your clearance certificate will be issued to you by your counsellor once you are no longer over-indebted and all your payments are up to date as per the plan set out for you. People who leave early or default on payments won’t be able to access new credit until they are unflagged, when all debts have been settled.
What Happens Next?
Should you choose to follow the quick fix path sold to you by a savvy salesperson, firstly you will have lost all the benefits and progress made while under your review, and importantly you will be without the protection offered by the process, leaving you vulnerable to creditors and their legal action. Should you want to re-enter debt review down the line, debt counsellors might view you as flighty.
What Should I do?
The only responsible route is to see your debt review to completion, and stick to the process with patience and determination. Once you are released from debt review, you will be able to take on more credit and hopefully would have learnt not to repeat the same mistakes. Should you be struggling during your review, the best solution is to take it to your counsellor for guidance and advice on further managing your budget at home – perhaps an alternative source of income, or a request to advance your salary are options. This process takes time as it is meant to rehabilitate your spending habits.
Keep tracking your debt review process so you have an indication of when you might be exiting, and avoid falling into traps set by unscrupulous salespeople and lenders who are not registered and not looking out for your best interests in the long term..
