Can I get a loan while under debt review?

In terms of section 88(1) of the National Credit Act (NCA) 34 of 2005, a consumer must not incur any further charges under a credit facility whilst under debt review. When a consumer applies for a debt review,  they are flagged as under debt review. This implies that in a case where an application is lodged by a consumer who is under debt review, when the credit provider pulls up their credit report, it will show that they are under debt review.  According to the NCA, the consumer under debt review cannot enter into any new credit agreements while under debt review. Any credit provider who extends credit to a consumer flagged as under debt review is deemed to be reckless lending.

In this respect,  you cannot obtain a new loan while under debt review. Debt review, also known as debt counselling, is a legal process intended to help over-indebted consumers. The goal is to restructure their debt payments to make them more manageable, allowing consumers to meet their basic needs while repaying their debts according to a court-approved repayment plan.

Here’s why obtaining a new loan during this period is not permissible:

1. Legal Restrictions:

• The National Credit Act (NCA) prohibits consumers under debt review from incurring any further debts. This includes taking out new loans.

2. Objective of Debt Review

• Debt review aims to help consumers regain financial stability. Taking on more debt would go against this objective, making it harder to achieve a stable financial position.

3. Creditors’ Perspective

• Creditors are unlikely to approve a new loan to someone under debt review due to the increased risk of non-payment.

4. Debt Counsellor’s Role

• A debt counsellor will advise against taking on additional credit to ensure that the consumer can successfully complete the debt review process and regain financial stability.

5. Potential Consequences

• Attempting to take out a new loan while under debt review could jeopardize the process. It might lead to the cancellation of the debt review, leaving the consumer without the protection it offers against legal actions from creditors.

It is advisable to focus on completing the debt review process successfully, adhering to the restructured payment plan, and avoiding any actions that could jeopardize this progress. Taking on new debts, such as a loan, is not in line with the principles and legal guidelines of debt review