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What’s the Difference Between a Debt Consolidation Loan and Debt Counselling Services?

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Leading UK
What’s the Difference Between a Debt Consolidation Loan and Debt Counselling Services?

Debt consolidation and debt counselling – these two terms can often be misunderstood. In reality, they are different. Debt consolidation is a physical solution to a debt problem, often in the form of a loan. Debt counselling, on the other hand, is a service for individuals, partnerships and businesses struggling with debt and not sure which way to turn. Debt counselling can often lead to a form of debt consolidation but whatever your debt position, getting a better understanding of these two terms is essential. Let’s look at them in more detail.

Debt counselling services

Nobody likes having to face their debt issues, be it individual or company debts. The first thing to say is that the sooner you seek help, the better, and that is what debt counselling services do.

Over the past year, the number of people and businesses in debt has risen significantly, predominantly due to the coronavirus pandemic. Ernst Young predicted that UK businesses will have borrowed more than £60 billion by the time we reach the end of 2021. Indeed, the British Business Bank (BBB) recently released data that revealed 45% of UK-based SMEs applied for financial support in 2020; 89% of those applications were due to COVID-19. Their data also showed that a ‘sizeable number’ were likely to struggle to recover and pay back their debts in 2021.

Debt counsellors work with individuals and companies to help with not only managing their finances, but also working with them to find the best solution to becoming debt free in the future. Depending on the financial situation and the level of debt, it is possible to avoid bankruptcy or company liquidation. Quite often, a debt consolidation solution is possible and will avoid any court proceedings.

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