The right kind of credit counseling can help an individual manage debts and reduce payment pressure

KNOW YOUR DEBTS

1. The increase in debt burden due to increased inflation and payment pressure is creating problems.

2. Credit counseling involves explaining the impact of a debt situation to the individual

3. It requires regular interaction with the individual to understand their position better and gain their confidence

4. If situation is unsustainable then the debt might have to be restructured or changed for optimum utilization of funds

5. One might also have to close an existing debt by replacing it with new debt at a lower interest rate.

6. Every person should leave a margin for emergencies

7. Each case is different and hence has to be tackled accordingly

The twin effect of inflation and payment pressure has increased the debt burden. This has resulted in people having to cut their expenses in different areas and even change their lifestyle so that they are able to manage their position with the available funds. What they need at this stage is proper credit counseling so that they are able to tackle the situation better.

Credit counseling: Credit counseling refers to the process where a person is explained the impact of their debt burden, which they may have taken or are planning to take. It also refers to counseling an individual to deal with the accumulated debt burden and the manner in which they will get out of the position. It requires regular interaction with the individual to understand their position better and gain their confidence so that the required steps can be taken.

Debt restructuring: Often, there is a situation debt accumulated by a person becomes a problem, as they have to service the debt. Once the financial situation gets a bit tough it becomes difficult to meet the interest and repayment requirements. At such a stage, it might be essential that debt be restructured or even changed so that funds are utilized and positioned effectively. One might also have to close an existing debt by replacing it with new debt at a lower interest rate.

Ensure proper margin: Many people plan their budgets in such that they use up the full amount that they earn. This makes the position extremely tight because it leaves no margin for error. There is hardly any extra amount available as a backup in case things do not go as planned. At such times any extra need for funds can create a situation where some other expenditure has to be postponed or sacrificed altogether. One of the ways in which a person can deal with this is to ensure that there is a margin available for any sudden changes.

Individual position: Every case has to be seen in a different light because the position of each individual varies according to the conditions that affect him or her. This requires proper understanding of the situation and hence credit counseling occupies an important post for an individual. This can be very useful for those who require a helping hand to set things right and get back on the path of financial sufficiency.