What Is Debt Counselling?
Debt counselling emerged as an industry just recently due to the public’s cry for assistance during the recent economic downturn. It was offered in June 2007 to establish a definite process for assisting customers with their personal debt. With the National Credit Act, the National Credit Regulator, or NCA, guarantees that all credit companies act in accordance with the Act. This includes such unethical behavior as reckless lending from greedy credit service providers. Debt counselling is a service which is generally performed by various providers known as debt counselling agencies.
Why Use Debt Counselling?
Debt counselling has actually become very popular these days since it not only helps people to regulate their mounting bills but also helps them to lead a life free from them. People voluntarily apply for it for protection from lenders and to negotiate lesser monthly repayments. It offers them more breathing space without them getting into trouble with their creditors for paying less than their original installment. With the exception of some non-profit businesses, the service is not normally free.
Debt Counselling or Debt Consolidation Loans
The first step is to look for financial direction before becoming involved with any consolidation loans. The former option provides protection for the individual from any unscrupulous creditors while at the same time instructing them on exactly how to get out of debt as they are literally doing it. The latter option offers no such protection but rather leaves them vulnerable to any financial manipulation. Despite this, debt consolidation loans do have their place and there are reputable financial institutions out there.
However, on balance, someone who is desperately seeking financial relief should try a debt counsellor first. They are experts in the field but more importantly they work with their clients. They protect the consumer from aggressive creditors who are quick to take legal action rather than listen to, or understand, the consumer’s problem.
Research the Service Providers
Before obtaining debt advice, you need to research available service providers. There are many companies out there offering this service. Make sure you do your research and background checks on them to ensure that you choose a reputable and qualified company that will offer you the best possible information and service. The National Credit Act has provision for debt counselling which represents a legal process for consumer protection during negotiations with credit providers for a more affordable repayment plan .
To get a debt counselling application, you must have the stated bare minimum salary and have debts above a specific amount. These prerequisites vary from one insolvency firm to another. Also note that debt counselling is recorded in your credit file. Proper due diligence on your part will ensure that you will be dealing with a reputable company when you give full disclosure of your financial situation which for some people can be quite confronting.
The application process takes up to 60 working days.
Meeting Your Debt Counsellor
Ensure that you are as honest and as upfront as you can be with your counsellor. The more honest you are with them the better equipped they are to assist you. In most cases this will lead to a positive outcome for all parties concerned.
Debt counselling requires that the debtor and the counsellor sit together for a session. These sessions will help you to better understand financial management and to employ ways to handle your unpaid debts. The counsellor studies the individual’s case and comes up with a repayment plan from an array of repayment methods available.
What Does a Debt Counsellor Do?
Debt counsellors are employed by insolvency companies to deal with long standing financial difficulties of clients.
- They negotiate with creditors on their clients’ behalf to restructure lower monthly payments on their outstanding debts.
- They consider all debt elimination options available to their clients and find the most effective for them.
- They may negotiate debt reduction for lower interest rates as well as lower monthly payments.
- They help consumers to avoid fines, legal complications or repossession by obtaining the necessary court orders for legal protection.
- They equip their clients with the know-how and skills to get out of debt and give professional budget advice to avoid future debts or bankruptcy.
An effective debt advisory service can steer the consumer towards a debt-free life.
The Debt Counselling Process
The first stage of the process is being placed under “a debt to review”. A counsellor performs a review of the person’s debts and helps them manage them in a more organized way. The company normally asks you questions about your finances before looking at how much you earn and how much you can afford to pay back to each creditor. When you approach your counsellor, ensure that you have all the necessary paperwork on hand relating to your monthly income and expenditure. This will help the counsellor to get started and to track all your outstanding payments.
The debt counsellor will then deal with your creditor to set up an affordable payment plan each month allowing you to address your debts whilst still meeting your other bills each month.
Debt counsellors cannot realistically provide solutions for debts incurred as a result of bad spending habits. A major aim of debt counsellors is to increase awareness in their clients about the negative effects these habits have on their financial lives. While their guidance assists in stopping the cycle of reliance by teaching clients the necessary skills to get out of debt and to budget properly, they still need to work through their financial difficulties on a private level. This will allow the benefits of their monetary guidance to be effective over the long-term.
If you are concerned about your debts, or your ability to repay them, you should seriously consider the benefits of employing a debt counsellor on your behalf. However, you must really commit to this process to make it work. When people make use of debt counselling, it is normally as a result of a voluntary decision to change their lives.
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