Debt Counselling or Debt Consolidation – Which to Choose

For a large number of consumers, managing their debt is a necessary priority. You may have
heard the words ‘debt counselling’ and ‘debt consolidation.’ But what are they, and which is
the best option to choose?
It is best to understand what each of these terms mean. Once you have a better perspective
of each, you’ll be able to choose which option is most suitable.

What is debt counselling?

To explain, debt counselling is a formal procedure instigated by the Nation Credit Act. It
allows for a consumer to be declared over indebted. A debt counsellor will then negotiate a
restructured payment plan and obtain a court order confirming the new repayment plan.
This involves extending the repayment plan, but will make sure that is easier to manage. As
a result of this, your assets will be protected, and you will have enough money to cover
living expenses. Debt counselling also aims to teach accountability. If just one of the
reduced monthly payments is missed, the agreement made with the creditors will become
null and void.

What is Debt Consolidation?

Debt consolidation, on the other hand, is when a loan is taken that covers outstanding debt
owed to the different creditors. However, here there is only one monthly installment to take
care of. It is advisable to find a loan that has a lower overall interest rate than the
outstanding debt.

Which is best for me?

Both solutions are designed to assist over-indebted consumers who find themselves unable
to meet their monthly financial obligations to their creditors. The best way to help one
decide which the better method for the circumstances is to speak to a qualified debt

It has been noted that many consumers lack the self-motivation to use the consolidation
loan for the right reason. Often times, consumers are tempted to spend the money, even a
little portion of it, on a must-have instead of the debt. This in turn, incurs yet more debt.

Debt counselling ensures that the money is paid directly to the creditors, no further credit
can be granted until the debt is paid up in full and the consumer won’t only repay his
outstanding debt, but also receive financial education.
For more information about debt counselling and debt consolidation, speak to One Debt