
15 Feb The Difference Between Debt Review and Debt Consolidation
Debt consolidation and debt review can both be attractive options to mitigate debt, depending on your financial needs, wants, and goals. The question is, what option do you go with? Is debt review as bad as everyone makes it out to be? Is consolidation loan the easy way out? Read on for answers to all these questions and more.
Overview of Debt Review
Debt review, also known as debt counselling, is a formal, legally regulated process supervised by a registered debt counsellor. They assess your financial situation, negotiate with creditors to reduce interest rates and monthly repayments, and create a single, manageable repayment plan.
Usually, people who are struggling with insurmountable over-indebtedness opt for debt review, as it leaves a mark on your credit record for years after its completion. Consider it if you’re struggling with over-indebtedness, have missed payments, or have legal action against you.
Overview of Debt Consolidation
Debt consolidation is when you take out one loan to cover the rest of your credit, making repayments more manageable and on a shorter term, with a lower interest rate. People who are severely over their heads in debt do not qualify for debt consolidation, as it requires a good credit score and the ability to repay the loan.
What should I choose?
This is a rough guide to the path you might take to pay off your loans and lines of credit.
Choose debt review if:
- You need legal protection against creditors. Creditors cannot harass you once you are under debt review.
- You need reduced repayments and interest. Debt counsellors negotiate with creditors to lower rates and payments, making debt more manageable.
- Budgeting isn’t your strong suit. Debt counsellors can create a realistic budget and manage your finances effectively.
Choose debt consolidation if you’re looking for:
- Simplicity. The process merges multiple debts into one manageable monthly payment, streamlining budgeting and tracking.
- Potentially lower interest rates: If you qualify for a loan with a rate lower than your existing debts, you can save money in the long run.
- Faster payoff: Consolidation loans often have shorter repayment terms than debt review, potentially helping you become debt-free quicker.
- Less impact on credit score: While taking out a new loan can initially dip your score, responsible management can rebuild it faster than with debt review.
What do you think? Debt review or consolidation? Get in touch with True North Debt or visit one of our locations in Canal Walk or Century City, Cape Town today!