How Debt Consolidation or Debt Counselling help You
Monday, July 20th, 2009 Subscribe To Our Feed
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 customer’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. A consolidation loan is where you consolidate all your short term loans and credit cards into your mortgage loan which is a long term lone. 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 mortgage loan to be able to consolidate your 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.
The other way to lower monthly installments, is to apply for debt counselling. 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 creditors to lower monthly payments to what the customer can afford to pay each month until all debt is repaid. The customer will stay in debt counselling until all debts are paid or customer situation changes for the better and applies to leave debt counselling. At the moment it is much easier to qualify for debt counselling than a consolidation loan at your bond originator. It is a sign of the times? Maybe.
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