Over-indebtedness occurs when a consumer is unable to repay all financial obligations in a timely manner and/or where total debt repayments exceed net income after living expenses have been paid for.
Many people are uninformed about what the pros and cons are when it comes to debt review or consolidation. Many people also do not know that there are two options when they find themselves over-indebted and struggling with their financial situation monthly. Let us take a look at the difference.
Debt review is a process whereby a debt counsellor assesses your outstanding debt and puts in place a restructured debt repayment plan. The debt counsellor will renegotiate interest rates and repayment terms with your credit providers to reduce them. The benefit of debt review is that it can protect your assets from being repossessed by the credit provider.
However, when you are under debt review you:
• Cannot enter into any new credit agreements (you cannot apply for any loans or finance)
• Pay additional fees (debt counsellor fees, payment distribution agency fees)
• Pay higher interest due to longer payback periods
• Have a negative credit profile
Because of the fees payable and more interest due to a longer repayment term, debt review should be considered in instances of significant over–indebtedness.
Explore the option of doing a budget and negotiating with your credit providers first, or consider debt consolidation.
Debt consolidation is a loan for the sum of all (or some) of your unsecured loans, like personal loans, from various credit providers. If you consolidate your debt, you are able to settle your high-interest debts and close the accounts, leaving you with only one debt repayment per month to the credit provider who granted you the consolidation loan.
Benefits of debt consolidation include:
• Borrowing money at a low interest rate to pay off loans or credit cards that are at a higher interest rate can save you money
• Having fewer payments to make each month
• Less likelihood that you will be late on payments
• Can help you improve your credit score
Allow Iemas to offer you a loan to consolidate your debt for a better financial wellbeing in your situation.
Call 0861 043 627 | SMS ‘Loans’ to 32297 (R1/SMS) | Email email@example.com | Visit www.iemas.co.za