Debt Consolidation or Debt Counselling?

Debt Counselling is when a over indebt individual goes to a debt counsellor to apply for debt counselling for protection from creditors and apply for lower monthly payments. With the help of a debt counsellor the over indebt individual can apply for lower monthly payments at creditor. The consumer’s monthly expenses must exceed his income to qualify for debt counselling.

Debt consolidation is when an individual will take out a new loan with lower interest rates and sometimes longer repayments terms to reduce the monthly installments and so better the individual’s cash flow. A consolidation loan is where you consolidate all your short term loans and credit cards with high interest rate into your mortgage loan which is a low interest long term lone. You will get lower interest rates and the term of the loan will be extended to up to 20 to 30 years.

Many people are finding it difficult to cope with increase in living cost and bills increasing month after month. A customer can apply for a consolidation loan or debt counselling to improve monthly budget or cash flow.

You need to have a long term low interest mortgage loan to be able to consolidate your debt. Only a mortgage with long term and low interest will decrease your monthly payments. You will consolidate your short term high interest credit card and personal loans to your long term low interest mortgage loan. Currently many people find it difficult to convince a bank to further lending. Banks have increased lending criteria and it is not easy to get consolidation loans via you mortgage.

You can also apply for debt counselling to lower monthly installments with creditors. Your monthly income must be lower than your monthly expenses which includes monthly essential expenses as well as debt to qualify for debt counselling. The debt counsellor will contact all your creditors and inform them that you have applied for debt counselling.

The debt counsellors will negotiate with all the customer's creditors to lower monthly payments. The customer will stay in debt counselling until all debts are paid in full. At the moment it is much easier to qualify for debt counselling than a consolidation loan. It is a sign of the current difficult financial times? Maybe.