3 Factors Credit Counsellors Analyze When Giving Advice About Debt Solutions

Posted on: 1 September 2015

When you cannot figure out how to get out of debt and get on the right financial track, it might be a good sign that you need expert help. Credit counselling services are designed for people like you, and they can help you decide which type of plan will work best for your needs. As you work with a credit counsellor, he or she will analyze your financial state and will offer recommendations to you. These recommendations will be based on the following factors.

Your Current Budget

Before a credit counsellor can give you any advice, he or she will need to thoroughly analyze your current financial situation, which includes your budget. Even if you are not currently living on a budget, the counsellor will need the information typically found on a person's budget. This includes all your income, your fixed monthly expenses, and all the debt you owe.

The first step will be to compare the amount of income you have monthly to the monthly fixed expenses you have. Fixed expenses are those that you must pay every month, and these expenses are usually around the same amount each month. They can include your:

  • Mortgage payment
  • Car payments
  • Utility bills
  • Insurance bills

The difference between your income and your fixed expenses is the amount of money you can use for everything else in life, including groceries, gas, entertainment, savings, clothing and debt. This amount of money is a huge factor in choosing a debt solution, because it will help the counsellor find out how much you can afford to pay towards debt each month.

If you have a significant amount of money left after paying your fixed expenses, you might be able to afford to go on a debt consolidation plan. If you have very little money left, choosing to file bankruptcy might be a wiser solution for you.

The Types Of Debts You Owe

The second huge factor that plays a role in a credit counsellor's recommendations is the types of debts you have. If the majority of your debt is through unsecured loans, such as credit cards, using bankruptcy could be a good way to become debt free. Bankruptcy would allow you to have debts like this discharged, but bankruptcy does not allow discharges for the following debts:

  • Alimony or child support
  • Student loans
  • Money owed to the government

If the majority of your debts are for things excluded from bankruptcy discharge, filing bankruptcy would not be useful to you. To get debts like these paid off, you might be better off choosing debt consolidation or a debt settlement plan.

Your Credit

Your credit also plays a role in the advice a credit counsellor will offer to you. If you currently have excellent credit, you may want to choose a debt solution that would not damage this. One option available for people with excellent credit is taking a personal loan. If you could qualify for a personal loan, you could use the proceeds to pay off all debt you have. This method offers several key benefits:

  1. You will be paying a lower interest rate.
  2. Your payments will be smaller.
  3. You will have a set number of payments for the debt.
  4. Your credit will not be damaged.

If you have poor credit, you may not really care if it gets a little worse through the debt solution you choose.

Getting professional advice for your debt problems is the best way to find a plan to help you become debt-free in the future. You can learn more about this by making an appointment with a credit counselling service near you.


Keeping Your Finances In Check

When I started working from home, I realized that my pay was going to be a little more unpredictable than it had been in the past. However, I realized that with a few proper money management skills, I might be able to make my financial situation work--no matter when I got paid. I started keeping a very strict spreadsheet about all of my finances, and it was amazing to see how much that simple act helped. My blog is all about helping you to learn how to keep your finances in check, so that you don't struggle with decisions about money.

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