We face financial crunches time and time again and therefore
take loans to help us get through the situation. However, many a time we make a
mountain out of a mole hill – making a small economic snag seems like an
impossible accomplishment and so … we take loans again! Taking a personal or
consolidation loan has become a part of life. Often, misjudging our
circumstances, we fall further and further into debt. And since we’ve always
been told that there’s a solution to every problem, here is another concept that
we have created, that has survived over time, it is called debt
management.
Sometimes, while in the process of paying up umpteen loans,
the varying high interest rates, innumerable monthly payments to be sent out to
different lenders and demands of everyday life begin to take their toll on us.
This is why most of us fail to keep up with our regular payments. Result - constant
harassing calls from our lenders, incessant collection visits and reminders and
finally, legal notices. This is where debt management is commonly suggested.
Debt management is a process which involves informal negotiations with your
creditors so as to achieve either a reduction in the interest, a reduction in
the complete contractual payment or waiver of any additional charges like
creditor fees, processing charges, etc.
A debt management process is initiated only once borrowers
provide proof that they have insufficient funds to meet all the contractual niceties.
This is followed by a negotiation with their creditors regarding their
inability to repay the entire loan. Most lenders prefer a settlement with debt
management because if they don’t, the next option for the borrower is filing
for bankruptcy. No lender can get anything out of that! Most creditors
understand the problem and offer solutions to make repayment easier. They may
also waive off some part of the loan. Expert advice from credit counseling
agencies makes the process a lot simpler. These agencies even negotiate with
lenders on your behalf and help you repay your loans.
Points to remember for debt management:
1. Make a budget and keep to it:
While making a budget, be specific and detailed with it. Try
your level best to stick to it. The more you write down and record your
financial transactions, the more likely you are to stay on track. You'll be
amazed at how much money you spend on things you don’t really need. Your budget
should define how much money you'll send to each of your creditors monthly, how
much you need for bills, and how much is left for flexible spending. Make sure
you limit the amount kept aside for flexible spending.
2. Evaluate your debt situation:
Assess your financial standing – your spending and your
savings. When taking your loans into consideration, remember to include the
principal amount, the interest, creditor charges, etc. Include all other debt
and owed amounts.
3. Clear your debts one by one:
While sorting out your situation, even though you cannot
make the regular payments, try to send small amounts toward all your loans.
Eliminate as much debt as possible. Start by sending slightly larger amounts to
clear off the larger loans. Smaller loans will get sorted out with small
regular payments.
4. Take expert advice if necessary:
When it comes to debt management, credit counseling agencies
are the best places to turn to. Most credit counseling agencies are non-profit
companies. Of course, there are fees involved. The idea is that you write one
monthly payment to the agency, and they in turn distribute that money to your
creditors. Credit counseling agencies are used to dealing with people with bad
credit or poor credit, and can help you create a custom debt management plan
(DMP) too. They can suggest money lenders that might be more willing to make a
loan to someone with a lower credit rating.
When in a grave financial situation, never hesitate to
consider debt management. If you don’t or if debt management too, fails to help
you, then you will have to file for bankruptcy. Bankruptcy frees the borrower
from all his debt so that he could start afresh. However, it leaves a bad
impression on the credit score and the borrower will find it very difficult to
obtain a fresh loan for many years.
Debt management may be able to lower your monthly payments
by 30-50%, stop the late fees and over limit charges, improve you overall
credit and put an end to life full of debt. Get the help you need through debt
management today. You will walk through the process and will be on your way to being
debt free.
More debt
management tips can be found at www.ezmortgagecalculator.org.
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