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Stuck in a Debt Trap? Avail Debt Counseling?

IndianMoney.com Research Team | Updated On Friday, February 26,2016, 06:43 PM
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Stuck in a Debt Trap? Avail Debt Counseling?

Find yourself deep in debt? Struggling to repay EMI’s on your loan? Perhaps it’s time for some debt counseling.The debt trap is not the end of the World. You can crawl out of it. All you need is some good old fashioned debt counseling.

What is Debt Counseling?

You need debt counseling, when repayment of your loans is beyond your control. You need the help of a debt counselor, to get out of this pit.

Debt counseling is of two types:

  • Debt counseling which only provides you advice on how to get out of debt.

  • Debt counseling which not only provides advisory services, but also negotiates with creditors on your behalf.

If you are in severe debt, you must opt for debt counseling which not only provides advisory services, but also negotiates with creditors on your behalf. The debt counselor negotiates with your creditor and comes up with a reasonable repayment plan, so that you can easily repay the loan.

How to do Debt Counseling?

You could opt for debt counseling, which only provides you advice on how to get out of debt. You need to give your financial counselor, details of your income and expenses. You also need to tell him details of the loans you have availed. The debt counselor analyses your financial position, based on the details you have given him. He then advises you to make a budget and limit your expenses. The money you save can be used to repay your loan. You have to strictly follow the advice of the debt counselor, to get out of the debt trap.

You could opt for debt counseling which not only provides advisory services, but also negotiates with creditors on your behalf. The debt counselor negotiates with the creditor (bank/lender), asking for a lower interest rate. The debt counselor also asks for a waiver of the late payment penalty. The debt counselor could also request the lender for step up repayment, where interest rates are lower in the beginning and gradually increase with time. You would have to pay a higher fee, which depends on the Organization and the extent of debt you are in. NGO’s provide debt counseling free of cost. Private organizations would charge you, fees for debt counseling services. You could also opt for debt counseling services, at your bank.

When Should You Avail Debt Counseling?

If you feel you cannot handle your debts, you better seek help from a debt counselor. First look for debt counseling services at your bank. Your bank knows your financial situation and could provide you excellent debt counseling services. Do not hide any important details from your debt counselor. Banks generally provide debt counseling services, only to their customers.

Be careful of private debt counselors who charge large fees upfront. Make sure you get what you are promised. Read the terms and conditions carefully before signing on the dotted line.

What should you do if you have availed loans from different banks?

If you have taken loans from different banks, you must contact the bank where you have the highest loan. Avail their debt counseling services and pay back the loan. These services are free of cost. According to the rules of RBI, banks are supposed to open debt counseling service centers, in all major districts. If your bank offers you debt counseling services, contact them and get rid of your debt.

Remember, Prevention is better than cure. Try not to fall into the debt trap, rather than avail debt counseling services later.

 

 

 

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IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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