Should you Consolidate Debt or go for Debt Counselling?
Debt Counselling is when a over indebt individual goes to a debt counsellor to apply for debt counselling. Debt counselling will allow the over indebt individual to negotiate with his creditors to lower monthly installments with the help of a debt counsellor. The consumer’s monthly expenses must exceed his income to qualify for debt counselling.
Debt consolidation is when an individual will take out a new loan with lower interest rates and sometimes longer repayments terms to reduce the monthly installments and so lower the individual’s monthly expenses. Most of the time an consolidation will take place where your credit cards and loans are consolidated into your mortgage. So you will get lower interest rates and the term will be extended to up to 20 years.
Many people are finding it difficult to cope with increase in living cost and bills increasing month after month. A customer can apply for a consolidation loan or debt counselling to improve monthly budget or cash flow.
To be able to consolidate debt you need to have a mortgage to consolidate debt. Only a mortgage with long term and low interest will decrease your monthly payments. You will consolidate your short term high interest credit card and personal loans to your long term low interest mortgage loan. Currently many people find it difficult to convince a bank to further lending. Banks have increased lending criteria and it is not easy to get consolidation loans via you mortgage.
You can also apply for debt counselling to lower monthly installments with creditors. Your monthly income must be lower than your monthly expenses which includes monthly essential expenses as well as debt to qualify for debt counselling. The debt counsellor that helps you with the application will go to all your creditors and inform them that you have applied.
The debt counsellors will negotiate with all the customer’s creditors to lower monthly payments. The customer will stay in debt counselling until all debts are paid or customer situation changes and opts out of debt counselling. At the moment it is much easier to qualify for debt counselling than a consolidation loan. It is a sign of the current difficult financial times we are facing? Maybe.
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