Can’t get a consolidation loan? Try Debt Management
How talking to a credit counsellor benefit you?
You should consider speaking to an expert when you are struggling to meet your monthlt commitments.
- Is your monthly payment so low, it goes to the high interest rate instead of making a difference to the principle debt?
- Are you simply overstretched and can’t afford to pay all your creditors (people you borrow money from i.e. Credit cards, payday loan etc)
A good Credit Counsellor will review your financial situation carefully and advise you on what you can do to start getting debt free.
If you are a person in debt (a debtor), talk to a credit counsellor today to find out about other ways to pay off and organise your debts.After being declined for a consolidation loan from the bank, there are bankruptcy alternatives.Positive changes in your life will be rapid.
What is a Debt Management Plan?
Debt Management Plans (aka. Consolidation Plan), is a payment program that both the debtor and creditors agree to.The debtor commits to making a fixed monthly payment, and in return the creditor grants interest relief. Programs usually run up to about 54, and the end of which the debtor should be debt free of all unsecured debts.
The payments from the debtor are consolidated into a single monthly payment and a prorated payment is made to each creditor.The result is less stress for the debtor.The debtor is then only concerend about a single or bi-monthly payment to make.
Interest Relief
The secret to getting debt free so fast on a debt management program is the interest relief.We see more and more people not really understanding interest rates of unsecured instruments like loans or credit cards, yet still accepting them.Interest really should be written in another article, but to prove a point one lady we just recently helped had a load that would of cost her twice the origional amount.
The creditor never wants the debtor to be made bankrupt.The unsecured creditors get even portions of what funds remain after the fees and secured creditors are paid.Obtaining interest relief means that the debtor is finally able to pay off the principle debt.Then the cycle could start again meaning they are then available as customers to the creditors again!The person finishing a debt management program hopefully has learnt their lesson.
What are the downsides to a Debt Management Program?
All of the accounts on the debt management program remain on your credit report for up to 3 years.Currently, Equifax keep this for 3 and TransUnion for 2.The debt will then be shown as a R7 rating. The ratings are on a scale from 1 to 9. 1 means that the account is paid on time, 9 being bad debt or bankrupt. R7 simply means that the account is paid off with the aid of a debt management program.
Until they understand the savings and financial freedom, people do not like the prospect of having R7s on their credit report.Your debt to service ratio impacts your credit score immensely. This basically means, how much of your monthly income is already assigned to outstanding debts.Being debt free, with more disposable cash and the R7 ratings seems a little more easy to handle.
The debtor has to agree to applying for more credit.Losing the access to a credit card makes life hard.Credit cards do make life easier.Renting a car, buying a plane ticker or purchasing anything on the internet are perfect examples.Applying for a secured credit card is a great alternative.Using a secured credit card can really help to improve your credit score whilst on a debt management program.
Summary
A debt management program is really a great alternative when you have been declined a consolidation loan.Living from month to month with debt is hard for anyone.It is the major cause of stress in the home and many marriages end because of it.
Anyone can see a program like this should be about a lesson in life. Credit really isn’t a right, and it should be treated with care.Any time changes can happen in our lives.Economy variants, family problems and job losses are out of anyones control sometimes. We should always be as prepared as we can for any obstacles that come our way.
Consolidate Your Credit!
