Debt consolidation vs debt review: which one fits your situation?

What is the difference between debt review and debt consolidation?

Debt review, also called debt counselling, is a debt relief measure created by the National Credit Act (NCA) for consumers who are over-indebted. A registered debt counsellor looks at your income, your basic living expenses and your debt obligations, then, if you qualify, negotiates new and more affordable payments with your creditors. Nobody can be put into the process against their will; you apply voluntarily.

Debt consolidation is a general term for combining several debts into one. In practice it usually means taking out one new loan, often over a longer period, and using the money to settle a number of older accounts so that you make a single monthly payment. It is not a legal procedure. It is a loan, and the lender decides whether to offer it after assessing whether you can afford it.

The key difference is who is in charge. In debt review a regulated process, a registered professional and a court or tribunal order stand between you and your creditors. In a consolidation loan you have one new credit agreement and the lender's own terms.

How does debt review work, step by step?

The National Credit Regulator (NCR) describes debt counselling as a debt relief measure for over-indebted consumers who struggle to pay their debts every month. You apply to a debt counsellor and submit supporting documents. The counsellor compares your income with your basic expenses and debt obligations and either accepts the application, because you are over-indebted, or rejects it, because you are not.

If the application is accepted, the counsellor notifies your credit providers and the credit bureaus, and the providers send the balances they say you owe. The counsellor then drafts a restructuring proposal. If all creditors agree, the matter goes to the National Consumer Tribunal for a consent order. If any creditor declines, it goes to the Magistrate's Court. The NCR says the process must be completed within 60 business days of the application.

There is no payment holiday. You must pay as the counsellor advises from the start, either directly to creditors or through a payment distribution agent registered with the NCR. If you stop paying under the process, a creditor may terminate it and take legal steps.

• You apply voluntarily and supply your income, expense and debt details.
• The counsellor assesses whether you are over-indebted and tells you the outcome in writing.
• Creditors and credit bureaus are notified, and creditors send certificates of their balances.
• The counsellor proposes a restructuring to your creditors.
• A tribunal or magistrate's court order makes the new arrangement binding.
• You pay as ordered until all restructured debts are settled.

How does a debt consolidation loan work?

You apply for one loan that is large enough to settle several smaller debts, such as store accounts, a credit card balance and a personal loan. If the lender approves it, the money is used to pay those accounts off, and you then repay the new loan in monthly instalments. The aim is one due date, one amount to track and, sometimes, a lower monthly payment.

A lower instalment usually comes from a longer repayment period, and a longer period generally means more interest paid overall. The NCR advises that stretching repayments over many months costs more in the end. The new loan may also carry its own initiation fee and monthly service fee, which the lender must set out in a pre-agreement statement and quotation before you sign.

The NCR has cautioned that borrowing to pay off other debt can keep people in debt for a long time, and it advises borrowing only for what you really need. A consolidation loan only helps if the spending that created the debt has been dealt with. Paying off a store card and then using it again leaves you with the new loan and the old balance. That is why many people write a budget before they apply.

How do the two compare side by side?

The table below sets out the main differences in general terms. Individual lenders and counsellors set their own detailed terms, so always read the documents in front of you.

Who might each option suit?

Debt review is designed for people who cannot meet all their monthly debt payments from their income, even after cutting expenses. The NCR lists warning signs such as borrowing to pay other debts, skipping some accounts to pay others, being unable to pay bills at month-end, and receiving letters of demand or summonses. If that sounds familiar, a conversation with a registered debt counsellor is a sensible first step.

A consolidation loan is more likely to suit someone who is still keeping up with payments but is juggling many due dates, or who is paying a high rate on several accounts and can qualify for a better-priced single loan. It needs a stable income and a clear plan, because it adds a new commitment rather than reducing the debts you already have.

If you are not sure which category you fall into, work out your numbers first. Our guide on how much you can afford to borrow shows how to compare your income and essential expenses, and our guide on what to do when you cannot repay a loan explains your first moves.

What does each option cost?

Neither option is free. The NCR is clear that debt counselling carries fees, that all fees must be disclosed to you in writing before you sign the application, and that you do not need to borrow money to pay them. The NCR publishes a fee structure guideline for debt counsellors, so ask your counsellor to show you which fees apply and when they are payable.

A consolidation loan costs interest plus the fees a credit provider is allowed to charge under the National Credit Act, such as an initiation fee and a monthly service fee. The Act caps the interest rate and fees for different categories of credit, and the caps change from time to time, so check the current figures with the NCR rather than relying on a number you saw elsewhere.

When you compare, look at the total you will repay, not just the monthly instalment. Ask the lender for the pre-agreement statement and quotation, and add up every instalment over the full term.

How do they affect your credit record?

While you are under debt review, the credit bureaus place a debt counselling flag on your profile. The NCR states that this flag is not a negative listing or blacklisting; it only shows that you are under debt counselling. You cannot take on new credit during this time. When all restructured debts are paid, the debt counsellor issues a clearance certificate, the bureaus remove the flag and the related information is expunged.

A consolidation loan appears on your record as a new account. Whether it helps or hurts depends on how the old accounts are paid off, how they are reported and whether you keep up with the new instalments. We cannot give you a figure or a promise, because outcomes differ between consumers and bureaus. You can request your credit report and check exactly what each bureau shows.

In both cases, missing payments will damage your record. The NCR says that paying late or not paying the full instalment will hurt your credit rating and may affect your ability to get credit in the future.

How do you find a registered debt counsellor?

Debt counselling must be done by a debt counsellor registered with the NCR. The NCR keeps a register of debt counsellors, found under the Registrants menu on its website, and you can phone its call centre on 0860 627 627 for help finding one. A registered counsellor must display the registration certificate at their practice, and you may ask to inspect it.

The NCR registers debt counsellors as individuals, so check the person's name and registration number, not just the name on a company advert. Ask for the full fee list in writing, take the documents home to read, and do not sign on the first phone call. The NCR has warned that some people have been placed into debt counselling without full understanding or consent, and it advises consumers to approach a counsellor themselves, not the other way round.

• Search the NCR register of debt counsellors by name or registration number.
• Ask to see the registration certificate.
• Request all fees in writing before you sign anything.
• Do not sign documents on your phone during the first call.
• Make your payments through a payment distribution agent registered with the NCR, or directly to creditors as advised.

How do you spot debt-clearing and debt-review removal scams?

Be wary of anyone who promises to wipe out your debt, cancel your accounts, or remove your debt review status from the credit bureaus for a fee. In March 2025 the NCR issued a circular saying that some companies and individuals offer 'debt review removal' services and ask for fees of up to R10,000 upfront, and that in most cases the status is not removed as claimed. Section 126A(3) of the National Credit Act says that anyone who offers to improve your credit record or remove information from a bureau may not receive payment until the service has been fully performed.

The NCR has also warned about callers who offer help with 'debt consolidation' or lower instalments, sometimes claiming to work with the NCR or government, and who then sign people up for debt review without proper consent. Real debt counsellors do not need to pressure you.

If you suspect you have been targeted, contact the NCR complaints department on 0860 627 627.

• They ask for money before doing anything.
• They promise to 'clear' or 'delete' your debt or flag.
• They claim to be from the NCR or the government.
• They push you to sign on the phone immediately.
• They ask you to pay into a personal account, or hold your ID or bank card.