Friday, December 15

An Introduction to Debt Management

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So, you find that your outgoings exceed your incomings. This is not unusual, particularly in these times of recession and a financial market trying to recover from such. An influence upon this imbalance for most people will be the debts they have accrued, either during times of financial hardship, or due to an over extension of credit that occurred when times were better.

Dealing with such debts is one way to bring your finances back on track. For those in the UK, there are several managed debt solutions that can help. Certainly, one can try to get one’s debts on track on a personal basis, but it is far easier to use the services of companies that specialise in these areas. Such companies have expertise in negotiating on a client’s behalf with lenders and creditors over and above private individuals.

There are three main debt management options within the debt management solution route. The most serious of course is bankruptcy, next (again in the UK) is the Government sponsored involuntary insolvency scheme known as an IVA and lastly there is the voluntary debt managment scheme. A company that specialises in such financial advice will be able to advise a client which of these options is best for the client, based upon individual circumstances.

Each of the available options involves calculations based upon the amount of debt a client has, the amount of equity they may have within any property (real estate) they own, their income and their expenditure. IVAs for instance have a base level of debt of £15,000, clients with debts below this amount do not qualify.

For most, a voluntary debt management plan is the easiest option. It has lower effect upon an individual’s credit rating, and allows for lower levels of debt when compared to bankruptcy and an IVA. Also, the minimum duration of such debt management plans is generally far lower than the other options. This means that one can adapt and change one’s options regarding creditors much sooner, and one can regain individual control of one’s debts should that be desired.

Care does need to be taken when choosing a company to handle one’s debts, as, with all things, buyer beware should be one’s watchword. Many debt management companies charge for their services and you should investigate these charges before signing anything or paying anything to them. Only when you are happy that a reasonable amount of your payments actually goes to your creditors to pay off your debts should you enter into any agreements with a debt management company.

Debt management solutions do indeed provide a useful service as often more of your available income is made available for your living costs and interest on debts can be frozen. Although such interest freezing is not guaranteed. However one should be aware of the fact that if you are paying less each month to your creditors, the duration of such payments may exceed the original duration of any debts.

To find debt management companies, google is your friend and a simple web search will find many choices for you.

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