August 19th 2009 05:46 pm
What is the best? Debt Counselling or Debt Consolidation
Debt Counselling is when a over indebt individual goes to a debt counsellor to apply for debt counselling. With the help of a debt counsellor the over indebt individual can apply for lower monthly payments at creditor.
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 better the individual’s cash flow. Most of the time an consolidation will take place where your credit cards and loans are consolidated into your mortgage. You will get lower interest rates and the term of the loan will be extended to up to 20 to 30 years.
Living cost and bills are increasing month after month and people are finding it difficult to manage their finances. Customers have a choice to consolidate debt or apply for debt counselling to improve personal monthly budget.
You need to have a long term low interest mortgage loan to be able to consolidate your debt. Only a mortgage with long term and low interest will decrease your monthly payments. So you will consolidate your short term high interest credit card and personal loans to your long term low interest mortgage. Currently many people find it difficult to convince a bank to do a consolidation loan. Banks have increased lending criteria and it is not easy to get consolidation loans via your mortgage at present.
The other way to lower monthly installments, is to apply for debt counselling. Your income must be lower than your expenses 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 in full. It is much easier to qualify for debt counselling than a consolidation loan at the present time. It is a sign of the current difficult financial times? Maybe.
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Tags: debt consolidation, debt counselling, debt counsellors
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