Debt counseling refers to the process whereby a debt counselor negotiates with your creditors on your behalf. A debt counselor is a person who helps people who are over-indebted by having to negotiate with the creditors. The debt counseling process aims to come up with an agreement where the repayment period can be extended or the installments reduced. The debt counselor can also organize with your creditors to reduce the amount of interest that you are supposed to pay on your loan.
Another role that the debt counselor plays is advising you on how you can spend your money wisely. Learning how to manage your finances plays an important role in paying back your loans efficiently. You will also learn how to save money when you enroll in debt counseling. However, you will incur a fee when you hire a debt counselor and this fee is incorporated in your repayment plan. This article explains more facts about debt counseling.
1. There Is a Criteria for Qualifying for Debt Counseling
To qualify for debt counseling, you should meet the laid down criteria. The first qualification is that you must be over-indebted. Having a lot of debt does not mean that you are over-indebted. Rather, being indebted refers that you cannot pay your debt on time. And debt counselors from O’Bryan Law Offices argue that people can pay monthly installments on time if they have everything thought out properly. It is also important to seek debt counseling services before your creditors take legal action.
If you approach a debt counselor when you are already being sued by your creditors, there is not much they can do and therefore you will miss on an opportunity for debt counseling. It is also mandatory to have an income when you are applying for debt counseling because that is the only way that the debt counselor can assure your creditors that you will be paying your monthly installments.
2. Debt Counseling Saves You from Further Indebtedness
Debt counseling will save you from taking more loans that you cannot pay back. You cannot borrow from another creditor until the debt counseling process is over and you get a clearance certificate. Because your credit record will indicate that you are still under debt counseling, no creditor can loan you more money. The debt counseling process can take a couple of years and this corresponds to the duration that you can’t take any other loan.
3. You will be Protected From Legal Action
After you seek debt counseling services from a debt counselor, they will verify that you meet the criteria for debt counseling. If you do, you will get protection from being sued by your creditors starting from sixty days from the time that you apply for debt counseling. You will be legally protected from your creditors as long as you pay your loan as stated in the debt counseling agreement. During this process, your creditors can only contact you through your debt counselor but not directly.
In summary, debt counseling refers to a process where a debt counselor negotiates with your creditors on your behalf to come up with an agreement on how you will pay back your loan. To qualify for debt counseling, you should be over-indebted, have an income, and should also apply for one before your creditors take legal action. Debt counseling protects you from more indebtedness because you cannot borrow more money until you get a clearance certificate.