There are a number of debt solutions that can help with unmanageable debts, but along with this can come downsides. Debt solutions that help to make unmanageable debts affordable again – including debt management plans – can affect your credit rating.
That’s not to say a debt management plan or any other debt solution should be avoided, because if you’re in trouble they could make a real difference. But you must be aware of these downsides before you start on any debt solution.
Quick guide to debt management
On a debt management plan, you’ll reduce the amount paid towards your unsecured debts each month to make them affordable again. For example:
– You have three unsecured debts, with payments coming to £600 a month
– Because of your other commitments, you only have £350 a month available
– On a debt management plan, your total unsecured debt repayments would be reduced to £350 a month (assuming your lenders agree to this).
A reduction in your debt repayments means your debts will probably take longer to repay, because you’ll still be expected to repay everything in full – but you’ll be repaying them more slowly. This could cost you more in interest in the long run, because you’ll be paying interest for longer.
However, lenders commonly freeze interest and charges on debts covered by a debt management plan. (Just remember that they are not obliged to agree to anything.) You’ll normally carry on with your debt management plan until your circumstances recover, or until your debts have been repaid.
Why will it damage my credit score?
Your credit rating will be affected because you’ll no longer be making the repayments you originally agreed when you took on the debt in the first place – you’ll be failing to stick to your repayment terms and this will appear on your credit report.
However, this needn’t be a huge problem in itself as long as your lenders are satisfied with the debt management plan. Lenders are legally obliged to accept any payment you make, but it’s obviously best to have their approval. Serious problems can occur if they don’t approve to reduced payments and decide to take action against you.
All records on your credit history remain for six years, and in this time, you may find it difficult to obtain new credit.
Many of my blogs recently have focused on the fact that many families are struggling with their finances, and for many it feels like it’s worse than it has been for a while.
Well, if you’ve been feeling like that, then you won’t be surprised to hear that according to a consumer analysis carried out by financial services company Markit, it was revealed that our household finances are worse than they were during the height of the recession, in early 2009.
The analysis showed that nearly 40% of consumers found that their finances worsened between July and August with the deadly combination of rising prices and decreasing salaries causing a big impact. The analysis showed that there has been the biggest reduction in people being able to save, since early 2009, with levels of debt increasing for the fifth month in a row.
No age, income level or region was exempt from this dire financial outlook, but it did find that those in the north seem to be affected more than consumers in the south. It also found that 49% of those surveyed expected that their financial position to get worse, with only 27% saying that they expected an improvement.
So, what does the future have in store for us as consumers? Hopefully those 27% were right in thinking that there will be an improvement. However, if you are struggling meeting any payments, then filling out a text loans instant cash applications could be an alternative. Small payday loans lenders make these quick and simple to apply for, and you just pay them back on your next payday. Check out them out for more information.
Around the world, there are millions of people in debt and the credit business is worth billions. It is no wonder why a lot of individuals find themselves with more debt than they can handle. Many people have heard of debt management plans so it is natural when you are short of money to look for free ones. The truth is that almost every debt plan is provided by a commercial company who need to be paid for what they do. They should explain their fees clearly before you sign up for anything and the usual system is that they cover their costs by taking a commission out of the monthly payments that you make into the plan.
Serious Debt Situations
If you are no good at managing your finances, you might even have to face the prospect of filing for bankruptcy. However, this should only be looked at as a last resort. Prior to actually filing for bankruptcy, you need to exhaust all the options that you have because there is no turning back once you declare this as the status of your finances. If you will not file for bankruptcy but you find out that your debts are more than what you can afford to pay, there are several alternative solutions that you can go for. There is applying for the Individual Voluntary Agreement which is offered to UK residents.
For this, up to about 75% of your debts can be written off, although there are certain conditions that need to be met. Another option is to take out a loan to pay for the debts that you owe. Called debt consolidation loans, this is recommended only those who are adept enough at handling their finances in such a way that they will not fall in a second debt trap where interests pile up and they are usually left with no choice but to file for bankruptcy.
Finally, there are debt management plans that you can opt for. Let us take a quick look at what happens when you for this option. As the name implies, debt management is a debt repayment plan which is specifically designed for individuals who find themselves with more debt than they can handle. Instead of having to pay several loans with interest rates piling up per month, you can consolidate all your debts and only make one payment per month.
The Pros of Debt Management Plans
You can go online and look for good debt management companies or follow recommendations for the best companies. The good thing about taking advantage of debt management plans is that the representative from the company will be the one to get in touch with the creditor to arrange for lower payments to be made.
Aside from reducing your debts in such a way that the monthly payments become more affordable and easy to pay, charges and interest rates can also be reduced. The representative from the debt company can even put a stop to harassing calls from your creditors. All in all, debt management plans are there to provide an alternative to filing for bankruptcy if you find yourself with more debt than you can actually handle. (more…)
If you have borrowings and outstanding balances on credit cards and/or with banks or building societies, even with loan lenders and are struggling to make everything balance, then consider your options and investigate the idea of consolidating your debts into one, easy to manage monthly repayment with one single provider… When it comes to budgeting and consolidating finances into easier to manage, monthly chunks there is no such better option for many than a debt consolidation loan. But what is a debt consolidation loan and is it right for you? (more…)
If your monthly debt payments are higher than you can afford, a debt management plan could bring your finances back under control.
How? Basically, your lenders might agree to change your repayment plan if they can see that this will help you repay your debts – even if it’s more slowly than they’d expected.
One of the main things they could do is accept lower monthly payments.
Our partners could negotiate with them on your behalf, asking them to accept reduced payments that reflect what you can realistically afford. As long as your lenders can see you’re doing your best to pay what you can, there’s a good chance they’ll agree to this – after all, you can’t pay what you don’t have, and a County Court usually won’t order you to pay more than you can genuinely afford.
So how much should you offer your lenders?
Bear in mind that they’re unlikely to agree to lower payments unless they can see you’re repaying as much as you can – and distributing it fairly among your unsecured lenders.
Good debt consolidation companies will go through your finances with you, working out exactly what’s coming in to your household and what’s going out. They’ll propose a way of sharing out the difference (your ‘disposable income’) in a way that’s transparently fair to everyone involved. Then, they’ll get in touch with your lenders and negotiate on your behalf.
And lower monthly payments aren’t the only thing. While it’s not guaranteed, your lenders may agree to reduce or freeze interest and waive other charges, giving you a much better chance of clearing your debts at an affordable pace.
A note about debt management
Lenders aren’t obliged to accept any changes to your repayment plan. That’s one reason many people choose to work with a professional debt management organisation, rather than negotiating with lenders on their own.
With many years’ experience working with borrowers and lenders, debt management organisations know how to negotiate. They know how debt works. They enjoy long-standing relationships with all the major lenders. In short, they could help you secure affordable repayment terms – by showing your lenders that it’s the best way forward for them as well.
Of course, ‘defaulting’ on your original agreements will show up on your credit report, whether you’re working with debt management experts or tackling your debts on your own. And of course, repaying any debt more slowly will delay the day you’re debt free and can increase the overall amount you end up repaying, unless your interest is frozen. Debt management isn’t always the answer. Depending on your situation, other debt solutions might be a better way for you to regain control of your finances and start clearing your debts.
After the recent financial upheaval, almost all individuals and families are not being able to manage their finances and are incessantly falling into debt. When these people are drowning under the sea of outstanding debt and looking for a way to come out of it, they can pursue debt settlement for clearing their debt. But before considering the option to wipe off the debt with debt settlement, you must gather some necessary information about it.
What is debt settlement?
Debt settlement, also known as debt arbitration or debt counseling is a process that allows the debtors to negotiate with creditors in order to reduce the pay off amount as well as the interest rate so that the debt becomes affordable to pay. One can negotiate the debt settlement with the creditor on his own or can hire the services of a debt settlement company.
How does a debt settlement company work?
A debt settlement company negotiates with creditors and reduces the pay off amount on your behalf. They also waive off the interest rate and charge-offs to fix your debt at an affordable repayment amount. A debt settlement company can reduce the principal amount of debt by upto 40% to 60% with their excellent negotiating skills.
However, before pursuing debt settlement or hiring the services of a settlement company, you must consider the advantages and disadvantages associated with it.
Advantages of debt settlement:
The biggest advantage of debt settlement is that it relieves you from your overwhelming debt and from the annoying creditor calls.
Another primary advantage is it helps you save hundreds and thousands of dollars by negotiating with creditors and reducing debt by upto 40% to 60%. However, the amount you can save depends on how well you or your settlement company negotiates with creditors. (more…)
If you’re already in debt, it feels like you’re trapped. There’s just no way out for you, is there? We think so, but until you really see any proof that other people can get out of debt, you might be stuck with these negative thoughts dancing around in your head. If you feel like you’re trapped, you might just give up and keep spending your way into a long hole. It’s time to get out of this destructive pattern. Your family needs you. Your friends want their mate back. It’s time to do better and better over time. It doesn’t get any easier, but you’ll find that you rise to the challenge so much better after the time has gone by. The truth about bad credit is that it’s really temporary. Sure, if you have a lot of debt it can take you some time to get out of it. But it all starts with the will to get out of debt. Once you have that, you really do have everything that you need.
What you need to do if you have a lot of debt is to start negotiating. You might need an interest rate deduction to really make your money count, or you might need to have other terms changed around. If you’re the type of person that tends to get nervous at the idea of negotiating with another entity, then you might want to consider turning to a 3rd party to negotiate with your creditors.
Going with a debt consultant that can really negotiate on your behalf isn’t always easy. You might find that trying to get a 3rd party involved can be pricey, but that isn’t always the case. If you’re someone that doesn’t have a lot of money free, you can go with a nonprofit option. They want to make sure that people get back on their feet, and handling debt is a surefire way to really make that happen. You do need to make sure that they really can negotiate with your creditors.
Creditors aren’t silly by any stretch of the imagination. The credit business is a pretty big business, and there’s always someone that’s falling into debt. The credit card companies do not want to see you declare bankruptcy, because this means that it’s highly unlikely that they’re going to get paid any money. So when they see that you’ve gotten someone to negotiate your debts, they’re going to be inclined to listen. This means that they have a fighting chance to get money out of you. If you’re nervous to do it yourself, getting a third party to negotiate for you is the next best thing.
Think about the weight that will be lifted off your shoulders. You’ll finally be able to get caught up on your credit cards, which means that you’ll be chipping away at your debt. You might be surprised to find how fast the lenders work on a new set of terms. They will be able to step in, let you get back on track, and possibly sell you credit products in the future. While you might not be in the market for new credit now, you might have a use for it later. The best thing that you can do is get an advocate on your side today.
And really, if you’re worried about how you look in the eyes of the third party…don’t worry about it at all. Getting people out of debt is what they do best. Why not check them out on your own time and see the results that they can deliver for you as well? Good luck!
In it’s simplest terms, debt management is about managing your finances to erase your debt. For someone who is deep in debt or has been in debt for a long time, this is much more difficult than it sounds. Many people go to a company to help them manage their debt because they are afraid or don’t know how to do it themselves. However, with a specific plan, you can manage and get rid of your debt on your own.
How Does One Start With Debt Management?
The first step in debt management is to assess your debt and income. List everything you owe and how much cash you have to pay on those debts. Unless you know this, you will be unable to manage your debt effectively and reduce it.
You also need to remove unnecessary expenses to free up more cash to pay on the debt. This may include getting rid of services such as cable television or internet service or not stopping at the local coffee shop every morning. You may have to stop eating out or going to movies for awhile. Every dollar you can put towards your debt will help you get rid of it that much faster.
A Debt Management Plan Can Makes Things Not As Surprising
If you do not have enough money to make the minimum payments on your debt, you need to contact the creditors to try to make arrangements. This is where a debt management company can be of service. They will deal with the creditors and negotiate lower rates and flexible repayment schedules.
What About A Debt Management Plan?
Working with a debt management company will also allow you to make a single payment to them and they disburse the money between your creditors. Once a creditor is paid in full, they will take that amount and add it to one of the others until you are debt free. The downside of using a debt management company is that they may take a portion of your payment as a fee for this service. So instead of putting all of the money towards your debt, you are now paying an additional bill.
The initial counseling session with a debt management company or credit counseling agency is usually free. This gives you a chance to talk to them and get answers to your questions without being obligated. If you do talk to a company, find one that has a strong reputation that you can trust.
Another way to manage your debt and reduce it quickly is to sell any assets that you can and use the extra cash to pay off some of your debts. You can also find a part-time job to get extra cash. Use coupons and buy on sale to save money on groceries. Look for little ways that can add cash and they will add up. The key to this is to find ways to get extra money to reduce your debts as quickly as possible.
Self-discipline is the way out of debt. You have to make paying your bills a top priority and make sacrifices to achieve your goal. You must change your way of thinking about credit. That is the start of a debt management plan.
If you are considering IVA, it is important to do some research on IVA costs. Many people mistakenly believe that IVA is a free service, but this isn’t true. Although the creditors are usually the ones that will absorb the cost of IVA, it isn’t a free service. There are fees involved, and in most cases creditors will agree to these fees because they know that they will likely get more of their money back if they help the debtor to avoid bankruptcy.
When an IVA company brings a proposal to the creditors, they will be presenting your financial circumstances, as well as how much of the debt you will eventually be able to pay back, in addition to how much of that money will be deducted for IVA costs. This will all be taken into consideration before the creditor agrees to the IVA proposal. If the fees are too high, there is a chance that the creditor will not accept the arrangement.
In addition to getting your agreement accepted by the creditor, the IVA costs will also affect your monthly payment; the more the IVA costs, the larger your payment will be.
Negotiating Living Costs on IVA
Also important to how much your monthly payment will be is the process of negotiating living costs on IVA. Due to the fact that you must be able to afford to make your monthly payments, you will not want to agree to a payment that sets your living costs on IVA too low.
To help ensure that you keep to your budget, make it a habit of reducing the amount of money you spend on grocery and hardware items, plus cutting back on your monthly utility consumption. Although tightening your budget will help, you still cannot agree to a budget that is so low that it will be impossible to keep your agreement.
Your creditors will try and get the payment as high as possible so that they are getting more of their money, and they often want the debtor to live on an unreasonably low budget. To avoid the pitfalls of this happening, never agree to a budget that you will not be able to live with, and always ensure that housing costs on IVA are taken into consideration.
To successfully get out of debt with an IVA, you will have to make sure you make your payments on time each month, if your living costs on IVA are too low, this may be impossible. Always make sure this is taken into consideration and find a company that offers the lowest IVA costs to the creditor; this will help keep your monthly payment as low as possible.
Remember, an IVA is meant to help you get out of debt, not cause more financial stress.
Spring is a great time to cleanse your whole house, but why should you leave your finances untouched? It’s better to make sure that you can actually get things done than to waste another season worrying about all of the things that you don’t have. If you’re in debt, running away from the problem does absolutely nothing. You’re going to have to figure out how to fight back as soon as you can. This often means doing things that you might not have considered before. So while you’re looking at the first flowers of spring, why not check out debt consolidation?
Debt consolidation is exactly what it sounds like — it’s about taking all of your debts, combining them together (usually without interest), and paying one payment every single month to take care of them. Debt consolidation definitely works, but you have to make sure that you’re committed.
Committed? Absolutely. When you work with a debt consolidation company, they work their fees into your monthly payment. This means that you have to make all of your payments on time, or the agreement becomes null and void. If you’re trying to escape high credit card debt, guess what that means? You guessed it — it means that you’re going to be stuck paying all of your credit cards separately. Did you know that every time you miss a credit card payment, the company reserves the right to raise your interest rates? This means that sky high interest rates eat away at your monthly payments. This is why people spend so many years taking care of a minimum payment, only to find that they really haven’t eaten away at the debt at all. They’re just treading water instead of moving towards a debt free life. The rise of bankruptcy and despair from having to declare bankruptcy should be a lesson to everyone else — avoid it at all costs!
Now then, we warn about debt consolidation because it’s not automatic. You have to make sure all of your creditors actually agree to it. This is done primarily through negotiations between them and the debt consolidation company. If you’re not a natural negotiator, this is a blessing in disguise. You aren’t going to be shooting your own foot off trying to get things done. You can go about your everyday, normal life making your payments.
But it cannot be stressed enough — you have to make those payments. Failure to do so undoes everything that you’ve worked hard to build. This means that until those debts are paid, you’re going to have to make some big changes. This isn’t a bad thing, when you really think about it. You should cut your spending. You’ll find as time goes by that all of the things that you felt you had to have just aren’t as important as you thought they were. This is something that can put a smile on your face.
Getting creative about how you have a good time isn’t too difficult. Indeed, the Internet is filled with free stuff to do. This means that you might even be able to cut your cable subscription. Use that money to fund your savings account a little bit at a time. It’s been shown that when people actually have extra money in a savings account, the number of emergencies is actually reduced. That’s something worth celebrating, right?
You will find that building your life back is difficult, but not impossible. The last thing that you want to do is keep spending money when you’re trying to improve your life. There are undoubtedly things that you will have to spend money on, but there are also things that you can avoid. As long as you think about it in those terms, you just can’t go wrong.
Why not start your journey today? There are plenty of debt consolidation companies to choose from. If you have any questions, please don’t hesitate to reach out to those companies and ask. That’s their job to make you feel as comfortable as possible in order to move forward.
Ask yourself right now: am I tired of the way things are? Am I really making as much progress as I think I am on my finances? If the answers are both “yes” to the first one and “no” to the second one, then you owe it to yourself and your family to take steps to end the cycle of debt. Even though this isn’t going to be an overnight process, it is a process that’s worth checking out for yourself. Good luck!