How is credit counseling different from debt adjustment?
Credit counseling organizations are usually non-profit organizations that advise you on managing your money and debts and usually offer free educational materials and workshops. Debt settlement companies offer to arrange settlements of your debts with creditors or debt collectors for a fee.
The difference between debt counselling and debt review. Debt counselling is the service that a debt counsellor provides to an over-indebted South African consumer struggling with their debt, and debt review is a regulated programme that a debt counsellor will place successful debt counselling applicants under.
What Is Credit Counseling? Credit counseling provides consumers who may feel overburdened by debt with guidance on consumer credit, money management, debt management, and budgeting. The goal of most credit counseling is to help a debtor avoid bankruptcy if they find themselves struggling with debt repayment.
Credit counseling organizations can advise you on your money and debts, help you with a budget, develop debt management plans, and offer money management workshops.
"Debt Counselling is a formal legal process that provides for a consumer to be declared over indebted and for the Debt Counsellor to negotiate a restructured payment plan and obtain a court order confirming the new repayment plan.
Your counsellor will look at everything you owe and will negotiate with your creditors for a more affordable repayment rate and even better repayment terms. In turn, your debts may take longer to pay off, but your monthly instalments will be far more manageable.
- You are not allowed to have more credit while undergoing debt counselling.
- It does cost a little bit of money, but the fees are set by law.
- Your debts might take longer to pay off as a result of paying smaller amounts each month.
Credit providers will no longer be able to take legal action against you. In summary, your score cannot be negatively affected by going under debt counselling.
A: Request a clearance certificate from your debt counsellor and submit it to the credit bureau. The credit bureau will then remove the debt review status from your credit report.
National Debt Relief is the best overall debt settlement company, according to our research. National Debt Relief's low-cost fee structure and referral service make it a top option for people struggling with debts. Our highest-rated debt settlement companies all charge similar fees, ranging from 15% to 25% of the debt.
Which of the following is not a purpose of credit counseling?
A service not provided by a credit counselor is lending the borrower money.
Credit counseling is a professional service, usually provided by a credit counseling agency, that provides consumers with guidance about credit, the repayment of debt outside of bankruptcy, financial management, and budgeting.
Debt counselling consolidates your debt into a single manageable payment that pays all your debt. This simplifies your financial life and makes it easier to budget effectively. This convenience can never be underestimated.
Credit Counseling Payment Programs. This is a hard figure to track since the credit counseling industry does not publicly report their success rate. But industry insiders report success rates of 20% to 25%. (See this article: Does Credit Counseling Work?)
A recent study found that major problems with credit counseling scammers include deceptive practices, excessive costs, no options other than debt management plans, and hard selling techniques.
If you are struggling to make your monthly debt repayments, you can apply for debt counselling with a registered Debt Counsellor or debt counselling company. This Debt Counsellor will determine whether or not you are in fact over-indebted.
Many debt management plan (DMP) providers charge a fee for their services but some don't. It's important to remember that if you don't want to pay a fee, you don't have to.
For example, if your current monthly instalments equal R2 000, your debt counsellor may reduce this down to R1500 per month, where R1400 will be sent to your creditors and R100 will count as your debt counselling fees. This means you will still pay R500 less each month, even when the necessary fees are included.
Realistically, the debt review cancellation process can never take less than 60 days. Firstly, the court application must be prepared and a court date must be obtained. The court date is never likely to be less than 2 weeks away, as the court application must be served on the debt counselor and the creditors.
Debt counselling usually lasts between three and five years, depending on the amount of debt, the arrangements the debt counsellor is able to negotiate and what you can afford to pay each month.
What are the advantages and disadvantages of debt Counsellors?
| PROS | 🔴 CONS |
|---|---|
| Reduced monthly payments | Fees and costs |
| Protection from legal action | Restricted credit access |
| Consolidation of debt | Applicable to limited debt types |
| Mediation between you and your creditors | Qualifying criteria |
Working with a debt settlement company may lead to a creditor filing a debt collection lawsuit against you. Unless the debt settlement company settles all or most of your debts, the built-up penalties and fees on the unsettled debts may wipe out any savings the debt settlement company achieves on the debts it settles.
If one is unemployed, it implies that they will not be able to make the monthly payments and the debt review process will not function effectively. The creditors require that the consumer will be able to actively pay the new repayment plan.
Credit counselors often have specialized training around debt, credit and money management. Some credit counselors can help arrange debt management plans with lenders to extend repayment periods, lower interest rates and waive fees. Credit counseling services are different from debt settlement companies.
- The counselors are accredited or certified by an outside organization.
- The agency offers a range of services, and is not trying to push a specific product, such as a Debt Management Plan..
