More and more people face greater amounts of outstanding debt due to the economic crisis and the ever higher cost of living. Debt can easily build up with growing outstanding balances on credit cards and the use of more unsecured personal loans. The interest on each new loan is higher because a borrower with a good number of loans is considered riskier. There are various ways in which you can get rid of outstanding debt. Some people choose bankruptcy, but there are more efficient and less credibility-damaging methods.
One approach for people who face a lot of debt is to use debt counselling services. These are designed not only to help you get rid of debt, but to teach you how to manage your finances so that you do not get in trouble in the future. When you contact a counsellor, the professional will perform a complete analysis of your current financial situation and recommend an effective solution. It could be negotiation of lower interest rates with current lenders, extension of the term of existing loans so that the monthly payments become lower, deferred loan and credit card repayment or a debt consolidation loan.
Benefits of Using Debt Counselling
The debt counsellors are professionals with excellent understanding of credit and finance. You should look for a service provider who has relevant education, certification, experience and excellent reputation in your local area. When you meet the counsellor you will discuss your current debt level, your income and expenses. The specialist will offer a solution which will help you repay your debt in an affordable and possibly money-saving way. The professional will also provide full assistance with the preparation of your monthly budget and with sticking to it. You will be able to manage effectively your debt and your finances as a whole.
Professional Personalised Service
Even though there is plenty of advice available from credit counsellors online, you should definitely visit the office of the professional that you have chosen in person so that you can take advantage of the personalised service which is provided. The counsellor will analyse each one of your current outstanding loan and credit card balances. The expert will analyse your recent credit history and more precisely the missed and late payments. This will enable the professional to recommend the most effective debt repayment strategy for you. The counsellor will look for ways in which the rate on each loan or line of credit can be reduced. The professional will also check whether debt consolidation is an option for you given your current income and credit rating.
You can select from debt counsellors who offer free services and ones that offer paid services. Free services are typically available from non-profit governmental and non-governmental organisations. If you use such a service, you will not have the option of selecting a particular counsellor to work with. If you decide to use a paid service, you can compare many different providers to pick the best one. You have to check how much the service will cost you. It is best if you request a breakdown of the fees which you will have to pay before you sign any agreement. Generally, the fees can be paid up front or after the service has been used. You have to decide whether the service will be affordable as well as useful to you.
There are various types of solutions which debt counsellors offer depending on the situation which the borrower is in. It is possible for the counsellor to negotiate lower interest rate on your behalf. This is an effective strategy when the counsellor has established relationships with lenders and when the borrower has a high credit rating.
Debt consolidation is another extensively used strategy. Most often, the borrower takes out a new home equity loan, which has lower interest rate, to repay personal loan and credit card balances. If the borrower is disciplined, this strategy should work out perfectly.
If the borrower has a good amount of credit card debt, a highly effective solution would be to take out a credit card which has 0% interest for a fixed initial period, which is usually from 6 to 12 months. The borrower can transfer all outstanding debt to this card to avoid paying interest. The key to success is to repay all existing debt before higher interest is charged on the new card.
Choosing a Debt Counsellor
You should use two methods for searching for a debt counsellor. The first one involves asking around. Talk to friends, relatives and colleagues and ask them to recommend a professional whose services they have used or who they know of. You should also perform an online search. Often ads are available on websites dedicated to personal finance.
Once you find a debt counsellor, you need to confirm that this is the right person for helping you with getting out of debt. Request to see the professional's educational qualifications and any certificates from professional associations. Check the person's years of experience in the industry. You should run a small interview with the counsellor and ask about recent cases that he/she has resolved.
Finally, you should know that debt counselling is designed to give you a blueprint for getting rid of debt and achieving financial stability. It is up to you to be determined and disciplined and put the plan into action so that you can enjoy maximum benefits.