The art of debt management

In making any purchase, you want that the item purchased must have a long term utility. However, while selecting the debt management technique a shift in the approach is quite noticeable. We find that short term debt management techniques like debt consolidation loans are much greater in use. Nevertheless, this is not double standard on the part of people. The choice is mostly influenced by the immediate pressure of debts.

Debt settlement techniques, which have a longer standing effect, are the rule of the day. People know them by the name of debt management in the UK. Debt management aims to strike at the roots of debt, instead of simply countering the after effects of debts. When debts are not allowed to increase, the use of debt consolidation loans and other short-term debt management techniques become redundant.

Why is debt management preferred to have a longer effect? The realisation is the result of people accepting that debt consolidation loans can give succour for only a time being, but not for ever. Even when borrowers are able to pay all the debts at a particular point of time, is there a guarantee that debts will not arise again? What shall one do at that time? Taking a new debt consolidation will not be a viable solution. The loan providers will be the first to deny loans to borrowers who have grown a habit of borrowing. And what about your home against which the loan is taken? Will it have sufficient equity left to be used for any other purposes? No! These are the reasons that have pushed borrowers towards seeking long term debt management. Certain borrowers are perplexed at the inclusion of debt consolidation loans in debt management, when the debt management agencies themselves say that debt consolidation loans are of not much good. To this end the debt management agencies reply in the following manner; “We do not recommend the total ban on the use of debt consolidation loans. What we recommend is a ban on the misuse of debt consolidation loans.”Debt consolidation loans are rampantly used in the UK. It is because of the ease with which people are able to draw debt consolidation loans that people have started spending rashly; thus being further weighed down by debts. Debt management agencies have come down on this habit of the people of the UK. Since debt consolidation loans abet people in taking more debts, debt management agencies also criticise debt consolidation loans. Debt management makes a planned use of debt consolidation loans. Compare the situation with an ailment that a person is facing. Debt consolidation loans will be like a surgery to be performed. However, doctors will first try to cure the ailment through oral medication. The oral medication is to be given through debt counselling. Only when oral medication is not able to cure the ailment, doctors will suggest surgery, i.e. debt consolidation loans. Debt counselling is referred to the advice to borrowers about the manner in which they can cure a debt problem. The advice is not general in nature. A Debt counsellor, who is an expert, will sit with the debtor during a few sessions to discuss the details of the debt problem. When debt problem is at its preliminary stage, it will require efforts from the borrowers own side. A Debt counsellor offers certain suggestions through which borrowers can bring upon a marked change in their finances. Debt management agencies have given a new look to certain age old principles of coping with debts. It is these principles that are made use of to inculcate debt sense in borrowers. It is during these sessions that the debt counsellor will access the use of debt consolidation loans. The factors that will be considered while making the decision are as follows:. What is the amount of debts that the debtor owes to one or different creditors?. Does the borrower have sufficient available income to repay debts on his own without using debt consolidation loans?. The nature of the debts- whether debts are accruing higher interest rate, and if they have already reached their repayment date. The various tips that you learned during the debt management process must not be forgotten during repayment of debt consolidation loans. While debts owed to creditors have been settled, you continue to owe to the loan provider. Never must the borrower relax until the final instalment of debt consolidation has been made.

Ann Gibson