Difference between Debt Consolidation and Debt Review
Debt review and debt consolidation are two different
concepts, but consumers more than often use the two terms interchangeably. Debt
consolidation entails taking out a loan to cover various
debts and thus ensuring fewer monthly payments. Debt review doesn’t
involve a loan, but rather the restructuring of debt amounts by
means of negotiation regarding interest rates and the total amount
payable.
Debt consolidation through a personal loan or
an additional bond your home is an option if the amount will cover
all the debts and the monthly repayment amount will be lower than
the combined amount of all the creditors on a monthly basis. If
it is not the case, and you are over indebted, you will benefit
from debt review. It should be noted that debt review is not a
payment holiday. The debt doesn’t disappear and you don’t
get a few months of non-payment. It does, however, mean that you
will be able to pay one monthly instalment instead for instance,
ten different ones. This monthly instalment will be far less than
the combined monthly amounts of the creditors.
It is done through negotiation with the various creditors for
a lower interest rate, and where possible, for a lower end amount
to be paid. Debt review is normally for a fixed period and once
all the debts have been settled, the individual can return to the
credit cycle if so wished.
The individual doesn’t have to negotiate with the creditors
or appear in court. Debt counsellors take care of the whole process
and also guide the individual regarding a new budget acceptable
to the creditors and to the individual. This means no additional
debt because of a loan and certainly no more credit for the period.
It is the most effective way of breaking the debt cycle while maintaining
the ability to pay monthly expenses such as school fees and groceries.
If you have considered a debt consolidation loan
and found that the amount will not cover all the debt, the repayment
amount is too high or that you don’t qualify because of over
exposure to credit, contact
us today for debt counselling assistance.
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