Debt management blog
Tips, help and information for people with all kinds of debt issues
If you`re struggling with unmanageable debts, then a debt management plan could help.
Debt management plans have helped many people - but, as with any debt solution, they do have their downsides. Here`s a look at how debt management works, and some things you may wish to consider before entering into a debt management plan.
Savings are an important part of our finances. They offer security for the future and protection against financial emergencies - and therefore protection against debt.
However, that`s not to say that savings should always be your number one financial priority. If you`re in debt, repaying your debts first can often save you a lot of money in the long run, as debts tend to cost you more in the way of interest than you`ll make on your savings.
Debts differ - and no two people in debt are facing identical situations. Even so, there are a few things that apply to just about everyone in debt. One of the most important is this: whatever kind of debt they have, they can be sure their debt won`t go away on its own!
Debts tend to get worse when they`re ignored - when people fail to keep up with their repayments, interest will build up, their creditors will want to know why they`re not paying, their credit report will suffer…
An IVA (Individual Voluntary Arrangement) is a legally binding debt solution that can help people clear unmanageable debt. If they can reach an agreement with their unsecured creditors, they will repay as much of their unsecured debt as they can afford over a fixed period (normally 5 years), and then their creditors will write off the rest, leaving them legally debt free.
If your problems with debt have come to the point where you simply can`t keep up with your repayments, then you might want to consider a debt management plan.
A debt management plan is an informal arrangement with your lenders for reduced payments towards your debts each month, based on how much you can afford to pay. In some cases, it can also involve a freeze or reduction in interest and other charges, which can prevent your debt from getting any bigger.
If you are struggling with unmanageable debt, then an IVA (Individual Voluntary Arrangement) is one debt solution that could help you become debt-free.
Since their introduction in 1986, IVAs have helped many people avoid bankruptcy. But as with any debt solution, you should always consider the alternatives before making a final decision.
To some, `debt management` and `debt consolidation` might sound like the same thing, but they`re very different debt solutions.
Even so, they can deliver similar benefits - and similar drawbacks.
Benefits
Debt management and debt consolidation can both:
If your finances are out of control, the first thing to do is stop - and take stock of your situation. Once you`ve figured out exactly where you stand, you`ll be in a much better position to figure out what you should do next.
So, sit down and write down the relevant financial information. You need to know exactly what you owe, what you earn, and what this means for your finances on a monthly basis. The answer to the question "What can I do?" depends largely on your disposable income: the amount of money you have left once you`ve spent the money you absolutely have to spend.
If you`ve entered a debt management plan through Gregory Pennington, you may want to know exactly where you`re up to with your debts from time to time.
That`s where a Personal Finance Manager (PFM) comes in. Your PFM is your first port of call whenever you need to ask a question about your debt management plan.
Rather than consolidating their debts or thinking about bankruptcy, many people who can`t keep up with their debts join a debt management plan, a professional debt solution that can reduce the monthly cost of their unsecured debts and reduce or freeze interest and charges. Simplifying their finances, this can give them a realistic, affordable path out of debt and back to financial stability.
So how does debt management work?
Debt management works by renegotiating the terms of the borrower`s debts. Lenders may be willing to consider changes to those terms if it looks like this is the best way of recovering the money they`re owed - rather than starting legal proceedings against someone, they may prefer to accept lower monthly payments.
Gregory Pennington are founder members of DEMSA (Debt Managers Standards Association).
DEMSA are the first trade body within the finance industry to successfully secure approval for its code of practice under the OFT Consumer Codes Approval Scheme (CCAS).
Registered in England and Wales
Debt Management | Debt Solutions | Debt Consolidation | IVA | Trust Deed