All About Debt Review

Published: 21st June 2010
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Before you apply for debt review, ensure that you know the pros and cons, and that you've considered the alternatives.

If you're straining under the weight of excessive debt, it's likely that you've considered a number of options for dealing with this problem. Unmanageable debt is a matter that requires immediate attention, and in order for it to be solved effectively, it's often necessary to obtain help.

One of the major reasons that consumers choose to apply for debt review rather than declare insolvency is that their assets are protected. Consumers under debt review, or undergoing debt counselling, cannot have their goods repossessed. Furthermore, declaring insolvency could prevent you from applying for credit for up to five years or more.

Debt review, counselling and repair can offer a lifeline to consumers who are struggling with unmanageable debt. However, it also comes with its own set of pros and cons, and it's vital to consider both the benefits and the drawbacks of debt review before applying for it. Read on to learn more about debt review, and to discover alternatives to it.

The pros and cons of debt review
Once debt becomes unmanageable, it must be addressed. In most cases, individuals need professional financial assistance in handling the problem. Many indebted individuals choose not to go directly to their banks or lenders, but rather to turn to debt counsellors instead. Debt counsellors basically assess your finances and make a recommendation on how to remedy the problem, based on your individual financial situation.

This is where debt review comes in. By applying for debt review, consumers protect themselves against losing their assets to creditors, and will have to live according to a very strict budget as set out by the debt counsellor. This is done as your debt counsellor will have negotiated certain repayment amounts with your various creditors. It's also important to note that while under debt review, consumers won't be able to apply for any further credit. Breaching this agreement could land you in serious trouble legally.

What most people don't know, is that debt review comes at a cost. Debt counsellors usually require a fee per application, as well as a monthly management fee. A rejection fee could also be charged should your application not be successful.

Debt review helps consumers to determine how to repay their debt on terms that they can manage, and it protects them against legal action from their creditors. However, it can also be costly, and in many cases, it isn't the right solution to the problem.

It is however important to remember that other options will require you to manage your own debt repayments whereas debt counsellors will manage this for you. So if you find it difficult to stick to set repayments, and are serious about rectifying your debt problem, it might be better to have a debt counsellor manage this for you.

What is the alternative to debt review?
Before considering debt repair, speak directly to your lender. Any reputable bank or lender will be happy to help you work out a payment solution that is manageable, and advise you on handling your debt more effectively. Did you know that there are simpler, less costly ways of managing your debt?

For example, if your debt is comprised primarily of short-term credit, such as store credit, you could consider applying for a balance transfer credit card, and consolidating all your debt into a single monthly credit card repayment. In this way, you'll repay one lump sum at a lower interest rate - making it easier for you to get on top of your repayments and settle your debt manageably.

There may also be other ways in which your bank or lender can help you to avoid debt review or insolvency. The first step is to speak to your lender.

Applying for balance transfer credit cards to reduce interest payments
Before your debt spirals out of control, consider applying for a balance transfer credit card. You'll reduce your interest costs, simplify your monthly repayments, and may even enjoy promotional interest rates for the first few months, or even the first year, of having the card.

Speak to your lender about applying for a balance transfer credit card. Alternatively, use a convenient online credit card application website to compare, find and apply for a balance transfer credit card.

About the Author:
Plastiq is a credit card comparison website that enables individuals to explore a wide range of leading South African credit cards, including balance transfer credit cards, which could help to lower interest payments and reduce debt.

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