Debt Counseling
Bad Debt Consolidation by splinder
Filed under Credit Counseling
Debt counseling is a multi-faceted, debtor-beneficial service, which is intended to guide borrowers to make the right decisions concerning various credit facilities. The general perception about debt counseling is that it is only meant for individuals who have bad credit. However, in reality, the scope of debt counseling is great. A person can hire debt counseling services for regular tasks as well, such as applying for a loan or planning for retirement.[br]
Debt counseling services are offered by various consumer credit service agencies, generally free of cost. The incessant growth of the Internet has also led to an increase in the availability of online debt/ credit counseling.
Rationale for Debt Counseling
The primary motivation for hiring debt counseling services is determining the best loan program. These agencies are capable of analyzing a debtor’s financial requirements and repayment capabilities, to determine the best form and amount of loan.
Special services offered by under debt counseling include:
- debt negotiation
- debt reduction
These services enable debtors to negotiate the terms of the present loans to obtain lower outstanding amount or interest rate. Doing so helps to reduce a person’s debt obligations significantly.
Debt Counseling or Bankruptcy: Which is the better alternative?[br]
An individual must consider going for a full-scale debt counseling when s/he:
- Is unable to pay the minimum monthly amount on the credit cards.
- Is consistently making late payments on regular bills.
- Is being persistently hounded by creditors.
- Has failed to work out appropriate repayment plans with creditors.
However, if a person’s debt is too large, credit counseling may not yield fruitful results. Creditors lower rates and debt amounts only to a certain limit. If one feels that s/he will be unable to meet the credit obligations even under the revised terms, then bankruptcy might be the only suitable option.
A general parameter for choosing between debt counseling and bankruptcy filing is to determine the estimated debt-settlement period. If a debt payment plan can be accomplished within two to four years, debt counseling would be a better option.
If one estimates that debt settlement would take over five years, filing for bankruptcy would be a good decision.