There are many decisions you must consider in circumstances of monetary struggle.

Published by Paragon Legal Services on November 15th, 2021.

å      Debt Consolidation

Debt consolidation refers to amalgamating all of your current and outstanding loans into one. This entails you getting further credit to clear your debts and combine the payments into one monthly amount to make the repayments more affordable.  A debtor can apply for one new loan which covers the total amount owing all of the existing creditors. This amount from the debt consolidation loan is used to pay off existing creditors. The debtor will now have only one payment to make to the new financier which is usually a financial institution such as a bank.


If debt consolidation is one of the options you are considering, then you should contact a qualified professional to give you advice on the different plans which may be available to you.

The most common debts you can consolidate are credit card balances and other consumer loans, including lines of credit. There are advantages and disadvantages to this option.



Ø  one monthly payment to one lender who would have paid off all previous or existing debts

Ø  the new interest rate is lower than your current rate

Ø  the debt can be repaid in a specific time frame

Ø  new repayment amount is more affordable



Ø  you must be able to qualify for the new loan with your financier

Ø  you must be able to comfortably make the repayment

Ø  you may have to provide collateral in the event you default on your payments such as a vehicle, a mortgage on your home, cash or capital investments


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å      Informal Arrangement

If you cannot obtain financing for a debt consolidation loan, you may be able to make an informal payment arrangement directly with your creditors. They agree to let you pay a lesser amount, or make your payments over a longer period.  There is no minimum or maximum amount to offer an informal arrangement to your creditors. This means you offer repayments based on a comparable dispersal of your left-over monthly income. You may ask for interests and charges to be frozen on your accounts.

This alternative is generally used for commercial debts, unsecured personal loans, credit cards, overdrafts, et cetera. There is no determined time limit for an informal arrangement. It is usually based on the proposition you make to your creditors in conjunction with the level of your debt. You must maintain your monthly repayments in an informal arrangement until your debts are paid in full, or until you can repay your full contractual repayments again.



You can talk to our expert at Paragon Legal Services and let us help you take your first step towards a debt-free future today!