Have you ever thought what would be the consequence of uncontrolled expenditure? While the desire to purchase continues to be unsatisfied, the income base gives up much earlier. The result is debts. Debts up to a certain level are admissible. Debts need to be managed to keep them within this level. The process involving the use of several techniques to curb the amount of debts is known as debt management.

Outside agencies may not always be the ones who carry out debt management. In fact, the first step towards debt management, i.e. accepting that debts are a menace, is taken by the borrower himself. This is an important step because no amount of debt management tips will be little helpful if the borrower does not have enough motivation to bring about a change in his financial situation.

Debt management help, for debts on a smaller scale require more participation of the individual himself. For debts that are not large and where the step is more of a preventive nature, debt management will include suggesting tips. One or two face-to-face sessions is what will be required. Along with the suggestions, debt management agencies will also tell about the problems that the individuals will face while incorporating the debt management tips. The individual himself has to employ the debt management tips. All the debt management agency would do is provide a helping hand whenever the individual falters.

Debt management on a smaller scale is known as debt counselling. The tips that are offered to curb the debts form a part of the ancient wisdom that is handed from generation to generation. The idea is to remind individuals of the knowledge. The following constitute the major debt management techniques adopted at this stage:

.There must be a restricted expenditure proportionately to the income.
.If possible, individuals must try to augment their income to suffice the additional expenses.
.If a debt is incurred, it must be repaid or proper preparations must be made for its repayment.

These and several other debt management tips will be offered to help bring about a real change in debt scenario. This will require patience and perseverance on the part of the borrower. Debt counselling can be a long drawn process. However, instead of creating cosmetic changes or a temporary healing of the debts as in debt consolidation loans and mortgages, debt counselling has a long-term effect on the individual’s debt scenario.

Nevertheless, the importance of debt consolidation loans and mortgages as a debt management tool cannot be discounted. When standing on the edge of bankruptcy, it will be imperative to clear the huge mound of debts already incurred. Once the finances regain health, only then should debt counselling be practiced. Situations like the one discussed above require an instant solution to debts and not a protracted one. Debt consolidation loans ensure the fastest release from the debts.

Debt consolidation loan is a personal loan that is employed to settle the debts. For the purpose of ease in settlement, all debts taken from several lenders are consolidated. The total of the debts is the correct measure of the amount of debt consolidation loan that must be drawn. The entire debt consolidation loan may not be consumed by the debts. It depends on the way debt settlement is negotiated. This is the reason why it is very necessary to engage the services of a proper debt consolidation agency. One of the principal distinguishing features of debt consolidation loans is that the loan provider helps in the settlement of debts. There is an active participation of the loan provider. In this method of debt management, the role of borrower ends once he presents the list of debts to be settled.

Debt consolidation mortgages, another popular debt management tool, is a second mortgage that includes certain debts in an existing mortgage. As in a debt consolidation loan, the borrowers will not be helped in settlement of debts. However, the advantage of this method is that debts are settled at the rate of a mortgage. Home equity loans also offer this advantage to the borrowers even though help from the loan provider may be absent.

Whatever be the method of debt management adopted, it must be effective towards debts. The ultimate aim of debt management must be to find a long lasting solution for debts. This can be brought about only by increasing awareness for the bad effects of debts and taking the necessary steps to curb them.

Alex

A Debt management program starts with evaluating your financial situation. This process involves an in depth analysis of your financial standing. That analysis will help you to evaluate whether it is better to file for bankruptcy or go for a debt consolidation program. A debt consolidation analysis will estimate the debtor’s potential savings through the program.

When a deal is finalized with the debt management company and the debtor. The next step is for one of the counselors to contact the creditors and work out a reduction in the interest rates and monthly payments at an amount that will be affordable to the debtor.

Through negotiations with the creditors, the debt management company usually reduces or eliminates the interest charged. The balance owed towards the creditors is reduced and they can give the debtor a reduction in even the principal amount.

The Debt consolidation program will also help the debtors by inducing the creditors to stop the legal actions which they were taking against the debtor which means they can no more devour debtor’s income nor can they take the debtor to court. Also this starts bringing up the credit rating of the debtor because now the debtor is repaying the debts under the new agreement.

With this method of debt relief, the debtor will no longer have to answer embarrassing phone calls from his creditors. The debtor will not receive any bills or pay the creditors directly. The debt consolidation program will directly take control over the creditors. The debtor will just need to pay the debt management company a single amount every month according to the budget which was agreed upon with the debtors. So there is no need for any interaction with the creditors.

Most of the time these systems are free to the debtor because the fees are paid by the creditors, since they would rather get something in return than lose all the money that the debtor owes them. Also, programs like this work for those with good or bad credit. It is a great solution for debt reduction to use a debt services company or consolidator that uses this method.

To view our list of the most recommended debt consolidation companies, visit this page: Recommended Debt Consolidation Companies.

Carrie Reeder is the owner of ABC Loan Guide. It is an informational loan website, with informative articles and the latest finance news.
Carrie Reeder

It’s Friday night and you just sat down to watch your favorite show. A few moments later a commercial comes on. That’s right, another credit counseling agency promising to lower your interest rates and stop collection calls. If you’re cynical or what others consider to be a skeptic, you’ll get up and deem this as an opportunity to grab a drink before your show resumes. However, if your values oblige you toward proper money management, you’ll grab a piece of paper and a pen and quickly jot down that phone number.
Free call. Free Analysis. Why not? Grab a drink during the next commercial.

What’s all the hype about anyway? Well its all about “credit card debt” in a nutshell. Most of us have it and truth is, we all want to get rid of it. Let’s face it, credit cards can be a GREAT thing, especially when you’re cruising around the shops window-shopping. A few moments later you realize you have this piece of plastic in your pocket and now you can make that “special” purchase. You may think twice, but in the end you’ll reward yourself. Nothing makes us feel better than buying new things. Unfortunately, if you’re not budgeting properly, you’ll dread the day that credit card bill arrives in the mail, and nothing will make you feel worse.

So how do you know you’re a good candidate for enrolling in a Debt Management Plan? Well, if you’re experiencing any of the following examples, you may need to make that DMP call sooner then you think.

. You pay only the minimum (or even worse you pay less then the minimum) on your credit card and think to yourself, as long as you send “something” that’s good enough.

. You use your credit card to buy things like food, gasoline, cigarettes, or beer.

. Your balances are going up and those over limit fees and late fees no longer surprise you.

. You have more credit cards then a successful gambler has poker chips.

. You’re signing up for every credit card offer in the mail.

. Your credit cards are no longer used for the sake of convenience but rather because you just don’t have any money.

. You’re hiding your purchases from your spouse.

. You change your home phone number in hopes the collection calls will disappear.

. You’ve reached the limit on most of your credit cards and now you’ve developed a significant amount of stress.

. You’re considering bankruptcy as an alternate way of “getting out” of debt.

. You use cash advances on one credit card to pay another credit card.

If you are experiencing any of these symptoms, then your best cure may be a Debt Management Plan. It may be easy getting into debt, but it doesn’t have to be hard getting out of it, if you do it the right way. If you don’t take control of your debt and you fall behind on payments, it will impact your credit report, or even worse, your livelihood.

A DMP is a far better alternative than bankruptcy to get out of debt and a better alternative than a debt consolidation loan or debt settlement. A DMP basically takes all your unsecured debts, and combines them into one monthly payment. However, it is not a loan. Instead of you sending out multiple payments for your credit card bills, you’ll send your credit counseling agency one payment. They in turn disperse it to your individual creditors. If you enroll in a DMP through one of these companies, there should be a fee payable. Make sure you are advised of this before you sign up for the plan. In general, these fees are not too large, and in any case, it’s a small price to pay considering the amount of money you’ll save in the long run. In this case you will have saved money while nobly paying off the entire debt you owe without (a) risking the loss of your home if you are unable to make the monthly payment on a consolidation equity loan and (b) damaging your credit and paying income taxes on the amount of debt not paid on a debt settlement plan. Once enrolled in a DMP, a certified credit counselor contacts your creditors and negotiates a lower payment on your behalf. Even better, they’ll get them to lower the interest rates, cease collection calls, re-age and report your account “as current” and waive or suspend past due fees and over-limit. Sounds good, right? Well remember, these benefits provide you with the opportunity to afford the payments and get them “paid off in full”. Depending on your balance and interest rates, your repayment time can take anywhere between 1 to 5 years. Now, that’s a deal! Considering the fact that without a DMP, you may face a repayment time of 8-15 years. Believe it or not, even more then that if you make the minimum required payments each month.

Once you successfully complete the program, the rewards are even better. You’ve rebuilt a better payment history and you’re debt free. So, the next time someone asks you what is a Debt Management Plan and why should I have one, smile at them, better yet, give them an arrogant smirk and pass along this article.

Nathalie Calvin