In this article you will find information about debt consolidation agency, debt consolidation and credit management, debt consolidation scams.

Debt consolidation agency

Accountancy is often deemed by people outside the profession to be inhabited by people in whose veins flows ice water.

They consider that accountants, by definition, view the world exclusively as one of numbers. Yet in certain spheres human considerations become just as important as the numbers that devolve around them. One of these areas is debt consolidation, an area in which chartered accountants know that the numbers tell only half the story.

Chartered accountants in public practice find the topic of client debt consolidation to be a routine and almost simple matter. Yet it is also the most complex and most fraught topic on which they may be required to advise.

Debt consolidation and credit management

True, it is a numbers issue. But one inextricably bound up with human frailty. At face value, debt consolidation delivers benefi ts that include:

• a lower aggregate, consolidated, interest rate in comparison to the average interest rate of the various debts of the client


• a fixed interest rate


• a fixed term, giving peace of mind through knowing when the debt will be paid off


• reduced fees through avoiding all the separate charges from numerous lenders


• avoiding the administrative problem of multiple invoices and payments.

Trading banks at the end of 2012 were demonstrating renewed and strong interest in debt consolidation. As a rule, the consolidation is against an existing asset, usually a residential property. It thus centres on refi nancing and this is simpler from the bank point of view than having to go through chores such as valuation.

Debt consolidation is also an important tool in their acquiring new business in the all-important young family and home owner sector.

Notice here the emphasis on trading banks as sources of debt consolidation loans. The reason is that the borrower, in this case the one having their debts consolidated, must from the outset seek to ensure that their consolidated lender at some future point does not discount the loan and factor it on to a third party of which the borrower was unaware. This is a danger by which debt consolidation, the cure, can so easily become more severe than the problem it was designed to solve. This is the syndrome known as digging a deeper hole. Credit unions offer debt consolidation and so do registered banks outside the trading bank or joint stock sphere. Here also the consolidated debt will remain undiscounted, unfactored and untraded and thus remain with the original party to the agreement.

Debt consolidation scams

A trading bank consolidated loan per annum rate at the end of 2012 was 15%. Or twice the home mortgage rate to selected bank customers.

A major appeal of consolidation loans is convenience. Instead of paying several different creditors who are charging different rates at different times of the month, the borrower takes out one big loan and pays off all those accounts. Then they make a single payment on that loan once a month.

If these original numerous debt elements include plastic credit then the 15% on the trading bank rate, quoted incidentally as an incentive rate, may look reasonable.

It is now that the chartered accountant finds their counselling in the matter of debt consolidation loans must be both thorough and exhaustive. They must investigate every single piece of data relating to the total indebtedness of the prospective consolidating borrower.

Indeed, it is knowing this full disclosure imperative that makes some clients reluctant in the first place to seek advice from their chartered accountant on debt consolidation.

Chartered accountants in these circumstances can, for example, find it hard to elicit details about internal family loans or short-term high-interest cash tide overs and especially ones from non-registered bank lenders.

This is only the beginning. The chartered accountant must precisely defi ne all this, weighed against a late payment or even non-payment of the consolidated loan the possibility, or probability, of which is likely o be worse than if they had just kept juggling he pre-consolidation medley of bills. This weighs heavily if the consolidated debtor has put up something like their workplace, perhaps their factory, up as guarantee.

Professional accountants know through experience that the heavily indebted are often also vulnerable to a denial syndrome in hat they cannot admit, even to themselves, et alone their accountant, what it is that hey actually owe and to whom.

There are of course just two options: debt management in which the existing state of ndebtedness will have to be worked through, placating certain creditors, promising others, actually paying still others. Then there is debt consolidation in which a multiplicity of creditors is exchanged just for the one. It is in the singularity of the consolidated debt that the accountant involved must give he same weight to the consolidated debtor as a person as they devote to the sets of figures that make up their liabilities. It boils down to a character assessment.

If it is a family, and the parents are working, can they both remain in work? Are here factors that may cause one to cease earning? Or even both?

Is there a lack of a temperament to adhere o the expenditure/savings regime that hey intend to embark uponfi Will there be backsliding of the type that might cause he single creditor, the one carrying the consolidated debt, to bankrupt themfi In New Zealand, debt consolidation is more fraught than anywhere else in the Westminster zone. Britain has its socially- concerned Cooperative Bank, now recently welled by the addition of 630 of the nationalised Lloyds branches. Australia has ts many vocational and community Credit Unions with their applied social conscience. Here in New Zealand, in contrast, there are in a practical sense only the Australian- owned trading banks whose bottom line is heir only consideration in these matters.