The law states that clients who are no longer able to meet their debt obligations should choose debt counselling before any legal actions are filed against them. Also, see to it that you learn about the benefits and drawbacks of this service.
Once you choose debt counselling, your creditors will be notified by your debt counselor. This is an advantage on your part since you will be able to show your creditors that you are sincere about changing as well as serious about your predicament. Also, your debt counselor will help you organize your finances by merging all your existing loans into a single file. This will allow you to make only a single repayment per month. Your creditors, in turn, will send your payment to your creditors.
Your repayments are going to be restructured for any outstanding debts; but your debt counselor will still set aside a fair amount for your food, transport, and other necessities. Until you are under debt review, you will not be subjected to legal charges for non-repayment of debt. In addition, there is a good chance that your credit ratings will improve once you choose debt counselling.
This service also typically involves engaging in negotiations with creditors to set up a debt management plan for the client. This plan may help you have reduced interest rates, fees, and payments. Moreover, your debt counselor will help you avoid stressful situations such as having to deal with your creditors. Instead of answering calls or sending payments yourself, your debt counselor will do these things for you. He will even be the one to make clarifications with your creditors.
Keep in mind that although debt counselling offers plenty of benefits, it also has several drawbacks. Fees, for instance, are inevitable. Even if you choose a non-profit company, you will still have to pay a fee. Nothing is completely free since the company still needs to pay their employees, get legal requirements done, and file paperwork to stay in business. Also, you have to be very careful when choosing a debt counselling company. Choose one that will have your best interest at heart.
Many debt counseling companies are either funded by creditors or are in close ties with creditors; and even though your credit status can improve in the future, being under debt review can also hurt your credit score. Your credit score may go down because your creditors will tell the credit bureaus that a debt counsellor is handling your trade lines. You will also not be able to use your credit card and your accounts will be frozen. You will not even be allowed to apply for new credit or credit extension.