What is Debt Review?

What is debt review

For the luckier ones, pulling oneself out of debt is a slow, painstaking process that requires month-by-month effort to rectify. 

Unfortunately there are also the not-so-lucky ones, whose debt is simply too deep or too severe. A slow incline towards recovery makes almost no impact at all. For this kind of debt, there’s debt review.

Taking action to get yourself out of the debt loop will be one of the best decisions you make in your life. Many people shy away from the idea of debt reviewing fear that it’s such a serious, permanent form of action.

In reality, debt review is a very positive place to be in for anyone with rising debt. Here is everything you need to know about it.

Debt Review Explained

Debt review is also sometimes referred to as debt counseling. Upon entering into debt review, a qualified (and registered) counselor will enter into negotiations with all of your current creditors on your behalf.

The negotiations basically involve making said creditors aware of your financial situation and having back & forth discussions about rectifying it.

Solutions may involve any of the following:

  • Reduced interest rates on any current credit agreements
  • Agreement periods extended
  • Reduction in monthly installments
  • Consolidation of a monthly debt payment for all areas of credit

Essentially, your debt counselor acts as the mediator between you and the creditors in order to render the best deals possible to move your situation forward. The goal is that you will be able to bring yourself out of debt faster than you would have without seeking help. It also keeps you out of trouble legally, as it shows you have taken initiative to rectify the situation you find yourself in.

Who Might Need It?

Debt review can be beneficial for anyone constantly drowning in debt and bills despite their best efforts.

If you’ve been in debt for a while, and have made effort to change things here & there to gradually see change but to no avail; then debt review could be for you.

Similarly if your debt is so severe that you’re unable to even consider taking basic steps to reverse it, then a debt counsellor could be your new best friend.

Ultimately, it’s always better to seek the professional advice of a counsellor before ruling yourself out of the debt review game. These trained individuals will be able to honestly tell you whether or not your situation is at a point where it needs review, or if you’re still able to handle it yourself.

If you’d like to be sure before seeking council, take the following steps to better understand the nature of your debt:

  • Using monthly statements, calculate the total amount of money incoming and totally amount of money outgoing (on average)
  • Consider if your outgoing payments outweigh your incoming cash flow and by how much
  • Calculate the total of credited charges that will accumulate for the foreseeable future
  • Are you in a debt based position?

If the answer looks like a yes, then it doesn’t hurt to take the first step and seek advice from someone who knows more about this than you do!

Questions Answered

In order to further break the stigmas surrounding debt review, let’s answer a series of important questions surrounding the process.

Are There Costs Involved?

Yes, there are a few basic costs involved in the debt review process.

Costs will vary depending on the council in question. For the most part, expect to pay an initial application fee with administrative costs; this will cover the process of analyzing your situation to see if review is applicable.

Once this happens, you can expect to be charged a much bigger lump sum fee that will include all admin costs, restructuring processes, legal fees and service charges.

There will also be recurring monthly payments for the duration of the debt review process.

What are the Criteria for Review?

In order to qualify for review you need to meet some criteria:

  • Have some sort of monthly income
  • Be approved for debt review by a registered debt counselor — if you’re not approved you won’t be able to seek further debt review services
  • Are you to cover all the fees involved in the debt review process
  • You can’t miss a single payment that was reduced through debt review discussions
  • Know that you won’t be liable for access to any further credit whilst participating in the debt review program
  • You’ll give your appointed debt counselors full power to do what they deem best for your situation, trusting that their systems are in place to pull you out of the spiral as quickly and effectively as possible

How Long Does It Take?

The total amount of time a person can spend in the debt review process really depends on the severity of the situation. Some debt takes longer to pay off than others. On average, a person will spend between three to five years within the debt review process.

The process can be sped up at any point should you somehow gain access to additional funds to pay off creditors. Your 13th bonus cheque at the end of the year is a good way to move things forward, for example.

Sometimes during the debt review process people come into large sums of money through inheritance or simply by luck. In these cases the debt review process could literally come to an end overnight.

Bear in mind that once you entered the program, you can legally exit only once all your debts have been settled. Home loans are the only form of credit that do not need to be fully completed before finishing your review.

Final Thoughts

Don’t let your debt weigh you down any further. Seek the help and advice from a council today & let’s start turning things around.

It’s the year of facing debt head on! Are you in?

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