Private loans during debt counselling

Why the term means different things

In the United Kingdom, debt counselling usually describes free, confidential advice from a charity or local agency, followed by a solution such as a debt management plan. In South Africa, debt counselling is the formal process regulated by the National Credit Act.

Searches for loans during debt counselling therefore mix two very different legal positions. Before considering any lender, it helps to identify exactly which stage you are in and which document, plan or court order now governs your finances.

The UK advice stage

Simply speaking to an adviser creates no credit file entry and no restriction on applying for credit. Advisers will, however, ask about every existing commitment, and borrowing more while a budget is being prepared usually makes the eventual solution harder to agree.

Once a solution starts, rules differ. Debt management plans are informal, so there is no statutory ban, yet plan providers normally require you not to take new credit. Debt relief orders, IVAs and bankruptcy carry legal limits enforced by the Insolvency Service or supervisor.

Breathing Space in England and Wales

The Debt Respite Scheme gives eligible people a 60-day pause on most enforcement, interest and charges, entered through an authorised debt adviser. It does not legally forbid new credit, but advisers expect people to use the period to stabilise rather than borrow.

The South African process

A South African consumer who applies to a registered debt counsellor is flagged at the credit bureaus, and section 88 of the National Credit Act prevents new credit agreements until the process ends. The counsellor proposes reduced payments that a court or tribunal can confirm.

Who benefits from counselling before borrowing

Counselling is designed for people who can no longer meet all repayments, are juggling arrears or are using new credit to pay old debts. For them, an additional loan usually postpones the problem and increases the total amount eventually owed.

Costs of borrowing on a damaged file

UK high-cost short-term credit is capped at 0.8 percent per day and a total cost of 100 percent of the loan, and credit unions are capped at 3 percent per month. South African rates are capped by regulation according to credit type.

Within those limits, borrowers with arrears markers typically receive the highest permitted pricing. A loan that seems affordable today can absorb the money a debt plan needs, so advisers compare total repayment against the monthly surplus identified in the budget.

Rights during counselling

UK advice charities offer their service free of charge and must be authorised by the Financial Conduct Authority. South African debt counsellors must be registered with the National Credit Regulator, publish their fees and give consumers statements showing how payments are distributed.

How benefits and income are treated

UK advisers include Universal Credit, disability benefits and child benefit in the household budget, and many solutions protect these payments from deduction. In South Africa, SASSA grants are listed as income in the budget but cannot lawfully be pledged as loan security.

Steps before applying for any loan

These steps work in both countries and help a household decide whether borrowing is lawful, affordable and actually necessary, or whether the shortfall can be solved within the counselling arrangement that is already in place.

1. Identify the exact solution you are in and find its borrowing rule in writing.
2. Tell your adviser or counsellor about the shortfall before contacting any lender.
3. Ask about payment holidays, reduced plan payments or a formal variation.
4. Check grants, hardship funds and benefit entitlements that do not need repaying.
5. If credit is permitted, compare credit unions and regulated lenders by total cost.
6. Record any agreement and update the household budget immediately.

Red flags for people in counselling

People in counselling are attractive targets because their credit files show distress. Any of the following signs suggests a scam or an unlawful lender rather than a genuine service, whether contact comes by text, phone, email or social media.

• A fee demanded upfront to release a loan or to clear a credit file.
• Claims that debt counselling can be removed instantly for a payment.
• Lenders with no FCA authorisation or no NCR registration.
• Requests for bank cards, PINs, online banking passwords or identity documents as security.
• Offers that require you to stop paying your plan or counsellor.

Fee-charging firms versus free advice

Some UK firms charge monthly fees to run debt management plans that charities provide free. Paying a fee is not illegal, but every pound spent on fees is a pound not repaid, and fee-charging firms sometimes recommend solutions that suit their income.

When counselling ends

After a UK solution finishes, the credit file shows the arrangement for six years from its start or from the default dates. In South Africa, the clearance certificate allows bureaus to remove the flag and lenders to assess applications normally again.

Can I get a loan while on a debt management plan?

There is no legal ban, but most plan providers require you to avoid new credit and many lenders decline applicants with arrangement markers. Borrowing without telling the provider can lead to the plan being closed and creditors resuming collection.

Does Breathing Space stop me borrowing?

Breathing Space protects you from interest, charges and most enforcement on existing debts for 60 days. It does not block applications, but lenders can see related markers, and advisers recommend using the time to agree a sustainable solution rather than borrow.

Can a South African debt counsellor approve a loan?

A debt counsellor cannot authorise new credit that section 88 prohibits. The counsellor can, however, propose a variation of the restructured payments or advise whether a consolidation agreement permitted by the Act genuinely lowers the total cost.

Is it worth waiting until counselling is finished?

Usually yes. Credit taken after completion is cheaper, lawful and easier to obtain, and it does not endanger the solution that is resolving existing debts. A short period of saving often removes the need for a high-cost loan altogether.

By Nabil Frik · Updated 13 October 2026