Debt Consolidation Or Credit Counselling: Which Should You Get
Debt is a common part of any economic activity as there are instances
when consumers do not have enough money to acquire their needs. But
sometimes, people go beyond their prescribed limit when it comes to
getting credit and end up with more expenses than they can actually
afford. This is where problems occur. Most of the time people end up
honoring their dues by adjusting their spending habits. But sometimes,
this is not even enough. This is where debt consolidation or credit
counselling comes in. And they are complementary but totally different
approaches to debt management.
Debt consolidation involves paying multiple outstanding credits using
one loan, with a lesser interest rate and a more tolerable payment term.
It allows people to effectively monitor what their dues are and respond
to them on time, with the right amount. It can be done straight cash or
through a credit card system. And among its benefits is that it
streamlines your debt records and makes it seem like you have a good
credit background. Its accessibility is limited to those who actually
have good credit scores. Nevertheless, folks who have below 700 may be
privileged to get it but they stand to provide collateral, get a
guarantor to vouch for them or accept a much higher interest rate that
their colleagues.
Credit counselling meanwhile, takes a less active stance towards debt
management and mainly just assists people in recognizing where they are
when it comes to paying their loans, how to handle multiple transactions
and then which should they should prioritize first. It is facilitated
by a credit counsellor who will examine their entire financial condition
– assets, income and debt all together. And together with the party
involved, will draft a repayment plan so you could be empowered to
resolve all your money issues on your own. Anyone, regardless of what
his or her credit rating is can avail of this intervention. The only
difficulty associated with it is following through.
No doubt, both approaches have different benefits and lessons to impart.
But they do mirror each other when it comes to disadvantages. For one,
debt consolidation or credit counselling do not eliminate debt. They
just rearrange it in a way that makes it easier for you to address.
Second, it is a process. It’s not like you can just snap your fingers
and everything falls into place. Both take time to put into action. And
third, they require your complete commitment. It may take months or
years before you finally resolve what outstanding credit you have
through both methdos. So you can’t just give up and walk away from
either if you feel like it.
Some experts believe that the choice on debt management is never debt
consolidation or credit counselling, but rather a mixture of both. See,
one cannot truly resolve their problems when it comes to their finances
if they are not given the chance (which debt consolidation provides) as
well as the knowledge (that credit counselling offers) to successfully
go at it.
