Navigating the financial landscape can sometimes feel overwhelming. With terms like debt review, consolidation, and more floating around, it's easy to get lost. At FinFix, we understand these complexities, and that's why we're dedicated to simplifying them for you. In this article, we address some of the most frequently asked questions about debt counselling to offer clarity on the subject.
1. What is debt counselling?
Debt counselling is a regulated process that helps individuals who are struggling with debt. Through this service, consumers can work with a registered debt counsellor to assess their financial situation, receive advice, and potentially restructure their repayments to make them more manageable.
2. How does debt counselling differ from debt review?
While many use these terms interchangeably, they have distinct meanings. Debt counselling is the broader process of assisting consumers with their financial woes. On the other hand, debt review is a specific part of this process, where your financial situation is evaluated to determine if you're over-indebted, followed by negotiations with creditors to establish a restructured payment plan.
3. How can debt counselling help me become debt-free?
The primary goal of debt counselling is to help you manage your debts effectively, preventing legal action from creditors and paving the way for a debt-free future. By restructuring your debts and providing guidance on budgeting and financial discipline, debt counselling can set you on a path on how to get out of debt.
4. What's the difference between debt relief and debt counselling?
Debt relief is a broad term encompassing various strategies and methods to alleviate or eliminate debt. This can include debt settlement, bankruptcy, and more. Debt counselling, however, is a specific, regulated process focused on providing advice, education, and a potential restructured payment plan for consumers.
5. Can I obtain new credit while under debt review?
No, while under debt review, you cannot obtain new credit. This restriction is designed to ensure that you don't accumulate further debt, enabling you to focus on becoming debt-free.
6. What is consolidation, and how does it relate to debt counselling?
Consolidation refers to the process of combining multiple debts into one single debt, often with a more favourable interest rate or payment term. While debt counselling can lead to restructured payments, it doesn't necessarily mean consolidating debts into one. However, a debt counsellor might recommend consolidation as a strategy in certain situations.
7. How long does the debt counselling process take?
The duration can vary depending on individual circumstances. However, once all debts are repaid under the restructured payment plan, a clearance certificate is issued, and you can exit the debt counselling process.
8. Will undergoing debt counselling negatively impact my credit score?
Entering debt counselling will reflect on your credit report, indicating that you're under debt review. This status remains until all debts are settled, after which the debt review flag is removed. It's essential to understand that the goal of debt counselling is to assist you in managing your debt, and the temporary impact on your credit profile is a step towards achieving a stable financial future.
9. Can I withdraw from debt counselling?
Yes, you can voluntarily withdraw from the debt counselling process, but it's crucial to consult with your debt counsellor before making such decisions. If you've not yet been declared over-indebted, you can exit without implications. However, if you're under debt review, withdrawing may have certain consequences.
10. How do I choose the right debt counselling company?
Research and recommendations are key. Look for companies with a proven track record, positive reviews, and ensure they're registered with the National Credit Regulator (NCR).
Understanding the intricacies of debt can be challenging, but with the right guidance and information, it's possible to navigate these waters effectively. At FinFix, we're committed to ensuring that you're equipped with the knowledge and tools you need for a brighter, debt-free future.
Note: This article is intended for informational purposes and doesn't serve as direct financial advice. For personalised guidance, always consult with a professional.