With the cost of living rising and salaries not keeping pace, more people are racking up credit card debt, personal loans and overdrafts to bridge the gap between income and expenses. But while there are several ways to address burdensome debt, ranging from paying it off on your own to getting proffesional help many people don’t know all of their options. Two possible solutions to address a stressful debt burden are debt consolidation and debt restructuring.
Debts restrict your normal lifestyle. You become stressed by worrying about paying back debts. But worrying doesn’t help you much. What you need to do is, select a suitable debt relief strategy, which is suitable for your financial situation that enables you to repay your outstanding debts.
Before discussing the topic debt consolidation vs. debt restructuring and which option is good for you, it is better to have an understanding about both the options.
What is debt consolidation and what is the process of debt consolidation?
Debt consolidation is helpful when you’re struggling to repay multiple debts. By consolidating your debts, you can combine your multiple debts into one thereby making a single monthly payment towards you outstanding dues.
Professional help is usually best to opt for when you want complete guidance to pay back dues and to handle the process without having you stressed out and feeling pressured to try to get everything in order…
Advantages of consolidating your debts with professional guidance:
- Single monthly payment towards paying back multiple debts
- Credit score usually improves as the debts are paid in full
- Interest rates on your debts get reduced
- Complete professional guidance
What is debt restructuring and what happens in debt restructuring?
Debt restructuring can help you when you can’t pay back the balances in full. It is a debt relief option wherein the settlement company negotiates with the creditors to reduce the outstanding balance.
Advantages of debt restructuring with professional guidance:
- You can clear each debt through a lump sum payment
- Outstanding balance gets reduced
- You can clear debts comparatively fast
- Once your debts are settled, you can add positive items in your credit report and your credit score will improve
Debt consolidation vs. Debt restructuring – What is the difference?
We have put together a table to easily showcase the difference between debt consolidation and debt restructuring, let’s have a look and easily compare the two debt relief options…
Why do I need a debt relief option?
Is paying bills starting to become stressful and daunting? Credit cards maxed out and its making you feel like the only way out is a loan o over draft? Let me break it down for you…
Those are the first emotional signs that you are drowning in debt and that its time to get a financial relief option, don’t cave into your stressful thoughts and make even more dent subconsciously you know that making MORE DEBT will give you TEMPORARY financial relief and when it comes back to paying for you debt, you are going to be placed back into that financial spiral and thus resulting in an unhealthy cycle.
How to prepare youself to select your debt relief option
- Make a note of your debt amounts
Listing all your debt down on a piece of paper is a great way to keep track of it
- Calculate your overall income
Jot down your fixed total monthly income, that’s a great start to track your spending vs you’re earning
- Analyse whether or not you can repay the debts in full
Once you’ve analysed your spending and the money you have left, asses what you can add towards you monthly debt
- Decide whether or not you want to keep your credit score intact or improve it
Making monthly payments on time and in full is a great way to keep you credit record in tack missing even one payment will have a negative important on your credit record.
- Think whether or not you can repay debts on your own or need professional help
If you are feeling overwhelmed just by thinking about paying you bills then it is best to seek professional guidance and help. Luckily for you we offer free financial advice and we are fully equipped and motivated to helping you gain financial freedom
How will you select your preferred debt relief option?
By asses your financial situation and having a clear understanding of each option available as a financial relief system or I you can’t manage to make a decision try seeking professional guidance from a reputable financial company to help you get clarity on the choice you ae leaning towards.
- How long does debt consolidation stay on your credit report?
It will reflect as a personal loan on your credit report, until it is paid up then only will the status update be made
- Can you get a consolidation loan with bad credit?
Debt Consolidation Loans for Bad Credit. If you have low average to bad credit you may still qualify for a debt consolidation loan but the interest rate will be high
- How do you qualify for a consolidation loan?
- Proof of income- Financial advisers will want to know that you have the financial means to meet the terms of loan
- Credit history- Financial advisers will check your credit report
- Financial stability- Financial advisers will want to know that you’re a good financial risk
- Equity- collateral such as home equity is one of the most common debt consolidation qualifications for larger loans
- Does debt restructuring hurt your credit?
Restructuring debt may hurt your credit score because borrowers are defaulting on original agreement.
- What is the difference between restructuring and rescheduling?
A practice that involves restructuring the terms of an existing loan in order to extend the repayment period. Debt rescheduling may mean a delay in the due date(s) of required payments or reducing payment amounts by extending the payment period and increasing the number of payments
- How do you restructure a debt?
Debt restructuring typically involves taking a new loan to pay off a variety of creditors. Ideally, the terms of any debt restructuring deal should be advantageous to the consumer, reducing the total of amount of monthly payments and/or the total amount of principal and interest to be paid over time
Everyone’s financial situation looks different. Therefore, you need to choose a debt relief strategy based on your situation and budget. You should explore all available avenues and avoid rushing into anything. There’s usually a good fit for everyone — you just have to figure out the right path. Contact us today or request a call back via our website and we will get in touch with you to help guide you to choose the right path for you and help you get started on your debt free journey.