Debt review and debt consolidation are personalised debt management solutions.
The choice on which one to use and which one may be more beneficial, is dependent on your personal debt situation.
However, the best way to decide what solution is right for you is to understand what each is, in-depth.
Debt Review / Debt Counselling vs Debt Consolidation
1. Debt review
Debt review is a debt management solution, otherwise known as debt counselling. It allows you to consolidate your debt without having to take out a loan.
With the process of debt review, DebtBusters will assess your financial situation and find the best possible way to restructure your debt. DebtBusters will negotiate your debt repayments with credit providers on your behalf.
Your debt repayments will be consolidated into one monthly repayment, which you will pay to an NCR regulated payment distribution agency. Your credit providers will also reduce your interest rates, and extend your payment terms, lowering your payments overall.
Once your restructured payment plan is confirmed and approved, your debt counsellor will allow the payment distribution agency to pay all your credit providers on your behalf.
Your bad credit records will be rectified once your debt repayments have been made.
2. Debt consolidation loans
Whereas, the process of debt consolidation requires you to combine all your debts and take out a new loan, to cover those debts.
Banks, credit unions, and instalment loan lenders may offer debt consolidation loans. These loans convert many of your debts into one loan payment, simplifying how many payments you have to make - the only benefit of this option.
You will, however, not receive the additional benefits that you get from debt counselling. In fact, the interest rates on debt consolidation loans is much higher than a normal loan.
How to decide if you should apply for debt counselling or debt review
Ask yourself the following questions:
- Are you experiencing financial problems?
- Are you struggling with debt and loan repayments?
- Are your accounts in arrears?
- Are you struggling to afford your monthly expenses?
- Are you unable to save any money?
- Are you creditors calling you excessively to ask for payments to be made?
If you have answered yes to most of the above questions, then either debt counselling or debt consolidation may be the answer for you.
Deciding which one is better, is generally the more difficult part.
However, debt counselling is often the most effective solution for people answering yes to these questions - because it comes with additional benefits that make your debt repayments easier (such as lowered interest rates, extended repayment terms, and so on).
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In addition, debt counselling gives you additional protection, ensuring that your assets such as your home cannot be repossessed. You’ll need this cover if you’re already being hunted by creditors.
A point of clarification
DebtBusters essentially consolidates debt with an offering that does not entail another loan, but is done through restructuring, one, lower and affordable instalment and an extended payment term.
Deciding if you should apply for a debt consolidation loan
When can you not get a debt consolidation loan?
If you, as a consumer, have missed previous debt payments or have had legal action implicated against you, then a debt consolidation loan will not be an option, as no credit provider will lend you money at a reasonable interest rate that will be affordable to your specific financial situation.
Many debt consolidation loans have high interest rates, which will inevitably deteriorate the client’s financial situation.
When do debt consolidation loans work?
For debt consolidation to work, consumers have to be sure that they are able to afford the monthly instalment every month.
This can only happen if the consumer manages to secure a loan at a lower interest rate than they are currently paying on the debts they wish to consolidate.
When can you not get a debt consolidation loan?
If you, as a consumer, have missed previous debt payments or have had legal action implicated against you, then a debt consolidation loan will not be an option, as no credit provider will lend you money at a reasonable interest rate that will be affordable to your specific financial situation.
Many debt consolidation loans have high interest rates, which will inevitably deteriorate the client’s financial situation.
When do debt consolidation loans work?
For debt consolidation to work, consumers have to be sure that they are able to afford the monthly instalment every month.
This can only happen if the consumer manages to secure a loan at a lower interest rate than they are currently paying on the debts they wish to consolidate.
Final thoughts on debt review and consolidation loans
Since over 90% of DebtBusters clients are accepted by credit providers for lower interest rates and lower monthly repayments, the debt review process stands as a much safer option than debt consolidation - which may lead to you paying more due to higher interest rates.
For a free call back and assessment to see if you qualify, please visit www.debtbusters.co.za
