What is Debt Management?

Introduction To Debt Management

Debt Management in layman’s term is having somebody to manage your debts. It could be an individual or team you hired or even a company that offered their services to you. And why would we need debt management? What does it do? This and a couple of other things will be discussed as we go along. Well, initially, debt management is for people who have debt and or bad credit rating. Debt management will get you out of debt, not add more debts or problems to you as what others may perceive. This is most commonly referred to as DMP or Debt Management Plan.

Debt Management Plan and USA laws

How exactly will a DMP help? The agent you hired will make a compilation of all of your debts, normally, excluding car and home loans. Once the total amount has been figured, the agent will go to the institutions where you owe money, and will try to make a bargain; to lower the interests that are being charged to you or even settle your account. But this will only be applicable to debts amounting to $10000 USD-up. (Applicable only to citizens of the USA) Okay, so maybe your total debts amount to $100K or even more, one could say, “I’ll just file bankruptcy!” Well, that is an option, but that was before 2005! Since 2005, there has been a new ruling under the United States law that filing a personal bankruptcy is no longer an option. Instead, citizens could participate in paying the said debts, only, it has to be done for a long period of time. This means it would not be so tough on one’s budget, plus individuals with huge debts now have a shot of making their wrong doings right, only, the long and hard way.

U.K Ruling

But it is completely different here in the United Kingdom; the law states that the borrower or the person in debt shall be educated in debt. Some of the possible answers might include mortgage re-calculation, an additional loan or a bankruptcy and debt relief order. Sounds like a fair deal? It is, for people with huge debts. Otherwise, if you would not like to use debt management, then do not apply for any loans that you don’t really need and do not use credit cards excessively. Misuse of credit cards or making loans that you don’t really need and beyond what you earn will definitely put you in an unwanted situation – being in debt.

Tips To Ponder On

Some guidelines to remember if you are allergic to the word ‘debt’:

  • Project inflow of money – one can calculate his income for the coming year and his allowable budget to be spent.
  • Make sure you have a savings account – a few hundred dollars in the bank might save you from being buried in debt
  • Learn to know the value of money – Even if you are earning an annual income of 500K per year, one must learn to look for the best deals; don’t be a compulsive buyer.
  • As a debtor, you must know your rights – This could save you big time in case you get in trouble
  • Research and read carefully the terms that you might be signing in a document.
  • Have a DMP ready before you even make a debt – This way, payment schemes can be forecast.
  • Lastly, learn to differentiate your needs from your wants – If you already have a car but you just want to buy one because you want to impress your friends, think again!
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What is Debt Management