
16 Jan Is Debt Counselling Worth It? Let’s Discover
If you’ve been considering debt counselling lately, you’ve likely wondered whether it’s worth it. With conflicting discussions on its pros and cons in online forums, it can be difficult to find an authority that candidly compares its benefits and drawbacks in a way that’s digestible and easy to follow.
Debt counselling is worth it if you’re at risk of being sequestered, a judgment, an administration order placed against your name, or any other derogatory mark. It’s a means of rescuing consumers from one too many defaults. If you would like to continue taking out credit and can afford it, you should consolidate your debt – though this can be an enormous error if you’re prone to overspending.
Debt review is a legal process where a debt counsellor negotiates on your behalf for reduced interest rates and repayments. It usually lasts for three to five years. Once under debt review, you’re protected from legal action and your assets being repossessed but are also not allowed to take out credit.
Let’s discuss the drawbacks of debt review to answer everyone’s big question: is debt counselling worth it?
Is Debt Counselling Worth it?
First, let’s define the “it” in this equation. We assume “it” refers to debt counselling’s drawbacks, like:
- Debt counselling takes relatively long
- You won’t be able to take out credit
- There’ll be a flag on your credit profile.
Let’s discuss these concerns.
Debt Counselling Takes Relatively Long
It’s true, debt review usually takes at least three to five years. This period can be shortened or lengthened by how much money you have to make repayments, called repayment capacity. The process takes that much time because repayments are reduced by lengthening repayment periods, allowing you to make smaller payments and accommodate your budget.
You Won’t Be Able to Take Out Credit
Under the National Credit Act, lenders are not allowed to grant you credit if your debt has been restructured. This is to protect you from incurring further debt (it won’t be protected under debt review) and from creditors losing money if you default (don’t pay lenders back).
By not taking on more debt, you’re giving your finances time to catch up to your means and creating a viable future for your bank account.
There Will Be a Flag on Your Credit Profile
When you apply for debt review, a status code shows up on your profile. This is to indicate how far you are in the debt review process. Creditors and bureaus use these codes to decide whether they should loan you money. For instance, a creditor might loan you money if you have a code A (applied), but not a D4 (making repayments under debt review).
Once you’ve completed debt review, your debt counsellor will give you a clearance certificate that you can submit to the bureaus to dispute the debt review flag, enabling you to apply for credit again.
Why Debt Review Is Worth Your While
Debt review offers a legal way to reduce your repayments, lessen interest rates, and retain your assets while having defaulted. Once under debt review, creditors are no longer allowed to take legal action against you (like involuntary sequestration/bankruptcy, where they might seize your assets and auction them).
Debt review is your shield against legal action from creditors. A debt counsellor will create a personalised repayment plan, help you save money, and help you get back on your feet. It’s your best weapon in the fight against debt.
Choose life, choose liberty, choose True North Debt: your partner in becoming truly financially free. Contact us today.