
07 Nov The Pros and Cons of Debt Counselling
It can feel quite daunting to think about getting assistance with our debts. In most cases, phrases like consolidating debts or negotiating with creditors might sound a bit perplexing. Many people don’t fully understand the advantages and disadvantages of getting help with debt and they’re unsure about what goes on during the process of debt counselling. As a result, a lot of South Africans end up handling their debt challenges on their own instead of seeking professional guidance.
In this article, we’ll delve into what debt counselling involves and discuss the pros and cons of debt counselling so that you’ll have a better grasp of it in case you ever need to consider debt counselling in your life.
What is Debt Counselling?
Debt counselling is a crucial part of getting control over your debts, especially when you’re dealing with a lot of them. It’s a key step in the process of reviewing and fixing your financial situation. Debt counselling is all about helping people who have too much debt. It involves advising on how to manage your budget, talking to the people you owe money to so you can pay them less, and reorganising your debts to make them more manageable.
Pros of Debt Counselling
Debt counselling offers several advantages that can be especially beneficial once essential living expenses have been covered. First and foremost, it secures your assets and prevents creditors from taking legal action against you during the assessment period to determine your eligibility for debt review. Additionally, any record of your over-indebtedness, if qualified for debt review, is temporary and gets removed from credit bureaus after completing the process.
Moreover, debt counselling provides access to expert financial guidance as qualified debt counsellors assess your specific financial situation, aiding in the creation of a budget, negotiation with creditors, and the development of a personalised debt repayment plan. Debt consolidation is a common component of this process, simplifying financial management with a single monthly payment and better progress tracking.
Debt counsellors can also negotiate for reduced interest rates on your debts, potentially lowering your overall debt burden. Furthermore, interactions between debt counsellors and creditors often lead to enhanced cooperation, resulting in reduced fees, waived penalties, and more favourable repayment terms.
Beyond immediate relief, debt counselling imparts essential financial knowledge and resources, empowering individuals to make better financial decisions for long-term stability. Most notably, it allows you to avoid the dire consequences of declaring bankruptcy and safeguards your credit score and financial future from severe and lasting damage.
Cons of Debt Counselling
Despite its advantages, debt counselling has its share of drawbacks. Firstly, it often entails additional costs, with some debt counselling companies charging fees for their services and financial assistance, which, though regulated, can still exacerbate your overall debt burden. Furthermore, participating in a debt counselling program can hurt your credit score, as your profile gets flagged by consumer credit bureaus, although consistent repayments can gradually improve your score.
Another limitation is that debt counselling predominantly addresses unsecured debts, such as credit cards or medical bills, potentially leaving secured debts like mortgages or car loans outside the program’s scope. Commitment is crucial, as failure to strictly adhere to the agreed-upon repayment plan can lead to further financial difficulties. Patience is required, too, as the process is not a quick fix; it involves negotiations with creditors, the establishment of a repayment strategy, and the gradual reduction of debts. During this period, you might need to make substantial lifestyle changes to meet your financial obligations without incurring more debt.
Taking on new credit is ill-advised while undergoing debt counselling, even though a debt consolidation loan may seem tempting. Moreover, there’s a risk of falling victim to scams from less reputable debt counselling companies, which can prey on those seeking help. Therefore, careful research and due diligence are essential when selecting a trustworthy debt counselling provider like True North.
Choose Wisely
As you can see, debt counselling offers great pros and cons so you have to choose wisely. Fortunately, you don’t have to face this ordeal alone. True North Debt offers free debt counselling consultations, providing expert guidance to navigate your financial challenges. We can help you consolidate debts, negotiate with creditors, and create a personalised repayment plan for you. Don’t let debt control your life. Contact us today to start your journey to a debt-free life.