Is it Best to Consolidate Debt?

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Sunday, July 26th, 2009 Subscribe To Our Feed

Debt Counselling is when a over indebt individual goes to a debt counsellor to apply for debt counselling for protection from creditors. With the help of a debt counsellor the over indebt individual can apply for lower monthly payments at creditor. The customer will qualify for debt counselling when his monthly expenses is more than his monthly income.

Debt consolidation is when an individual will take out a new loan with lower interest rates and sometimes longer repayments terms to reduce the monthly installments and so lower the individual’s monthly expenses. Most of the time an consolidation will take place where your credit cards and loans are consolidated into your mortgage. So you will get lower interest rates and the term will be extended to up to 20 years.

Many people with debt are finding it difficult to manage with increase in living cost and bills increasing month after month. Customers have a choice to consolidate debt or apply for debt counselling to improve personal cash flow.

To be able to consolidate debt you need to have a mortgage to consolidate debt. Only a mortgage with long term and low interest will reduce your monthly payments, but you will pay more interest because of the longer period of the loan. So you will consolidate your short term high interest credit card and personal loans to your long term low interest mortgage. Currently many people find it difficult to convince a bank to do a consolidation loan. Banks have increased lending criteria and it is not easy to get consolidation loans via your mortgage at present.

You can also apply for debt counselling to lower monthly installments with creditors. Your expenses, which includes living cost and debt, must be more than your income to qualify for debt counselling. The debt counsellor will contact all your creditors and inform them that you have applied for debt counselling.

The debt counsellors will negotiate with creditors to lower monthly payments. The customer will stay in debt counselling until all debts are paid or customer situation changes for the better and applies to leave debt counselling. At the moment it is much easier to qualify for debt counselling than a consolidation loan at the bank. It is a sign of the current difficult financial times we are facing? Maybe.

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