What are the disadvantages of Debt Review?
Debt review is a process that is designed to help individuals who are struggling with debt. It is a formal process that involves the assessment of an individual's financial situation and the development of a repayment plan that is affordable. While debt review can be an effective way to regain control of your finances, it is important to understand the disadvantages of debt review before making the decision to enter the process.
1. Negative Impact on Credit Score
One of the most significant disadvantages of debt review is the negative impact it can have on your credit score. When you enter debt review, a notice will be placed on your credit record, indicating that you are under debt review. This notice will remain on your record for the duration of the debt review process, which can be up to five years. This can make it difficult to obtain credit during this time, and can also impact your ability to secure a job or rental property.
2. Limited Access to Credit
During the debt review process, you will be required to adhere to a strict budget, which means that you may not have access to credit. This can make it difficult to make large purchases, such as buying a car or a home. While this can be beneficial in preventing you from taking on additional debt, it can also be a disadvantage if you need access to credit for emergencies.
3. Long-Term Commitment
Debt review is not a quick fix for debt problems. It is a long-term commitment that can take up to five years to complete. During this time, you will be required to make regular payments towards your debt, which can be challenging if your financial situation changes. Additionally, if you fail to adhere to the terms of your debt review plan, your creditors may seek legal action against you.
4. Limited Control over Finances
When you enter debt review, you will be required to adhere to a strict budget, which means that you will have limited control over your finances. This can be challenging if unexpected expenses arise or if your income changes. Additionally, if you have joint debt with a partner, both parties will need to enter debt review, which can be difficult if one party is not willing to do so.
In conclusion, debt review can be an effective way to regain control of your finances, but it is important to understand the disadvantages before making the decision to enter the process. If you are considering debt review, it is recommended that you speak to a financial advisor or debt counsellor to discuss your options and determine if it is the right choice for you.
​​If you have any questions about debt you currently have, please feel free to reach out to a member of the Libertine Consultants team. We are here to provide you with judgement-free support and advice.
