debt management

Dealing With Debt: Getting a Handle on Your Finances

Debt is an incredibly tricky subject. It can improve lives, and it can also make people miserable. ‘Good debt’ is a result of borrowing money which results in you earning back more in the long run. Whether it’s to buy a property (which will generally gain in value year on year), education to get a better job or starting up a business. It’s agreed all-around that these are the kind of things worth borrowing money for, as they will improve your life and give you financial security.

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However, on the flip side, debt can also be a result of people borrowing money to pay for luxuries and things they don’t really need. This can lead to a slippery slope of minimum payments and high interest rates. Meaning that despite making payments each month, the debt never really goes down. It can quickly lead to you becoming over-committed, and having to then borrow more money just to get by. When you’re relying on borrowed money to pay your regular monthly bills, or are using money you don’t have to live beyond your means it’s bad news. If you’ve found yourself in this situation, here are some of the ways you can go about it.

Stop Overspending

Your first step would be to stop overspending, plain and simple. Work out exactly how much income you have going in, and a list of your bills that go out each month. Anything that’s not essential get rid of right away. For your priority household bills, give each company a ring to make sure you’re getting the best deal and reduce things as much as possible. In the case of things like medical bills, you could find out if you have a personal injury claim if someone else was at fault. Compensation to pay these bills can make life much easier. Write out a monthly budget and stick to it. Any money leftover can then be used towards paying down your debts. Finally, cut up your credit cards. This will stop you from paying some off it and then spending back onto it again.

Speak To Your Creditors

It can be scary contacting creditors, but you will find that many of them are extremely helpful if you just ring up. If you explain your situation and that you’re so over committed that you’re no longer able to keep up repayments there are other options. Many will offer repayment options and even freeze interest rates so that everything you pay will be chipping away at the debt and not just going on interest.

Speak To a Debt Management Company or Charity

If you’re nervous about speaking to creditors or need to consider other options such as IVAs and bankruptcy, it’s worth contacting a debt company. They will be able to give you impartial advice and get you set up on a plan that best suits your situation. They will contact creditors on your behalf and help you sort repayments, and generally guide you and let you know what to do.


Debt Consolidation: A Few Pros And Cons Explored

The decision to opt for student debt consolidation should be factored on several crucial points. Financial experts often opine that it is better to steer clear of this method of debt management since (even with the smaller repayments) you end up paying much more than what you are paying on the several loans that have been consolidated in to one single payment. The repayment period is generally longer in case of debt consolidation and as such you end up paying more in the long term. On the other hand, since you’re down to one single consolidated debt from several ones, it becomes easier for you to keep track of your repayment.

Let us learn more about the merits and demerits of this phenomenon. However, even before delving into further details, it’s wise to remember that even if you’re opting for consolidation, you should take due care in going through reliable Services review in order to determine which debt consolidation program you should opt for.

Merits

If you have loans with multiple lenders or creditors and it becomes difficult for you to keep track of the payments to be made by you, you can resort to consolidation that helps you bring all your debts under one umbrella loan (for which you are answerable to only o5025164562_6af1ac753c_nne lender). Therefore it becomes easier for you to keep track of your payments.

Since the repayment period is longer, you can repay smaller amounts.

You can look forward to reinstating all your loan benefits like eligibility to apply for financial aid, deferments etc after you have made satisfactory arrangements for loan consolidation. Actually most of these benefits are removed once your debts are placed in default- but after opting for consolidation (i.e. when you’re placed out of default) you can look forward to the reinstatement

There generally are no application processing fees or prepayment penalties

The money that you’re saving up each month can be used for paying up other important dues like utility bill, rent etc- in short—- there is substantial improvement of cash flow with all your debts being consolidated

Demerits

There are chances that you might not qualify for the same deferments on your consolidated debts as those which were applicable on original loans

If you are including Perkins loans in the consolidation then you might end up losing the chance to qualify for certain forgiveness programs

As already mentioned above, a longer repayment period would eventually mean that you are paying up more in the long term

Conclusion

Its important to weigh the pros and cons carefully before opting for a consolidation program. Consolidation- it’s often opined – should be your last resort. If you’re struggling with your existing debts then you should first have a word with your bank or credit union. Find out if your family can chip in with help or not and then consider seeking the aid of consolidation.


Raise Your Credit Score Fast -Add 100 Points By 18 Months!

Today let’s focus on the best ways to increase your credit score. Without wasting time lets jump right into it.

1. Improve the “Utilization Rate” on your Credit Cards and Unsecured Loans. Then continue to use your credit cards, pay them off in full each month and consistently increase your credit limits.

Your credit score will increase as you reduce the balances on your credit cards.  Your credit score is based on a number of different factors, but one of the most important aspects of your credit score is the utilization rate factor. In other words, how much of your credit limit are you using on each of your credit cards?

It is a best practice rule to use no more than 30% of your credit limit.  If you use more than 30% of your credit limit on any one of your cards, that could lower your credit score. An example would be if you had a $10,000 limit on one of your credit cards, you would want to always keep the balance on that card below $3,000.

After paying each of your credit cards off in full, now you must continue to use them, but only charge what you can afford to pay off when the bill arrives.

Don’t leave any balance on your credit cards. This will also save you money in interest!

After practicing this perfect payment pattern for 9 months straight, it is now time to ask that your creditors raise your credit limit by 20% of whatever it is now.

 

Example:

If you have a $10,000 credit limit today, after 9 months of using your cards and paying the bill off in full each month, ask that the bank increase your limit to $12,000. Your long-term goal should be to have high credit limits on all of your accounts.

2. Eliminate debt collection marks that are showing up on your credit report.

This next tip will clear 50% of your debt collection marks that are over 2 years old. So if you have more than 10 old collection marks on your credit report, this will get rid of at least 5 of them right away. A professional debt relief company can assist you with any remaining debts that you are unable to clear up on your own.

Here is how you eliminate debts or remove them from your credit report on your own.

Get your free credit report. For less than $10 you can get a membership at freecreditreport.com. Review your credit report and score there.

Anything negative on your credit report that is more than 2 years old, simply dispute. With freecreditreport.com they give you the ability to dispute marks on your own. Just go to the membership section and click on where it says “dispute center”. Select the reason that best fits your situation, in regards to why you are disputing the mark, and then click submit! Like magic, you will notice that most of the old marks that you have remaining on your credit report, disappear after disputing them.

After you dispute the mark, now the debt collection company has only 30 days to verify and validate that the debt is yours. Most of the time if you have a debt collection mark on your credit report that is more than 2 years old, the debt collection agency who owns that account, will no longer have all the documentation necessary to prove the debt is yours.

If they cannot prove that the debt is yours, then it cannot stay on your credit report, according to the Fair Credit Reporting Act.

3. Ask your mom, dad, husband, brother, friend or anyone that trusts you, to add you to their best credit card as a favor. What you will be doing is piggy backing on their perfect payment history, and this will raise your credit score fast!

Make sure that they add you as a “joint user”. This way you will be credited for their perfect payment history. Sometimes if you get added as only an authorized user, they will not report the payment history. Obviously make sure that you trust this person, and make sure that whatever card they add you to, has less than 30% of the credit limit used. This means that if they have a $10,000 credit limit, and a $5,000 balance, don’t get added to that card.

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Paul Paquin is the CEO at Golden Financial Services, a credit card debt relief company.


5 Things To Do Today If You’re Drowning In Debt

Struggling with debtIt wasn’t so long ago that I was living paycheck to paycheck. In fact, worse, with my income I was struggling to just keep up with my minimum debt repayments each month. The slightest issue could (and sometimes did) derail the whole carefully managed situation.

Now, through, things are much different. I’m virtually debt free and have disposable income to enjoy. So there *is* light at the end of the tunnel. But trust me – if you’re really drowning in debt right now then you’ve got a lot of work ahead of you to regain control of your finances and come out the other side.

Based on my own experiences of fighting – and winning – against a mountain of debt, here are the four most important steps you should be taking today to start making some significant changes to your situation.

And remember; the longer you ignore your debt problems, the worse they will get. No matter how painful, uncomfortable or embarrassing they may be, the sooner you get started on solving your problems the sooner you’ll get your finances back on track.

Stop Spending Money

It might sound like the most obvious step of all but if you’re drowning in debt then your first step should be to stop spending money if at all possible. See if you can go for a day without spending a penny. Then try a week.

Stop going out with your friends for a while, give up those posh coffees, live on the food in your cupboards or freezer rather than buying more. Because the sooner you can stop spending money, the more you’re going to have left over for debt repayments and the sooner you’ll get back on your feet.

Review Your Outgoings

This step was arguably the most powerful for me. As someone who spends most of my money with my debit card – rather than using cash – I combed back through the last few months of bank statements, looking at exactly where I spent my money.

When you have your spending habits laid out infront of you in black and white, you’ll be surprised at how much you spend on certain things and where savings become obvious. Consider reducing your cell phone tariff, using price comparison sites to get a better utilities supplier, cancel direct debits that you’re not using and so on.

By calculating your savings as you go, not only will you be pleasantly surprised at all the “extra cash” you’ve found, but as this figure grows it’ll also help to motivate you into really making a dent in your debt situation.

Sell Your Junk

Everyone has unwanted stuff at home and selling it off on sites like Ebay, Amazon and Craigslist is one of the easiest ways to find a few hundred dollars out of thin air. Combined with the savings you’ve made on your spending, within a few weeks you should find yourself coming up with a small “nest egg” of money you didn’t even know you had – and that can come in very handy indeed.

Negotiate With Your Creditors

Are you struggling to keep up the payments on your debt? If so, it’s time to ring your creditors to see if they can help. This is without a doubt the most unpleasant part of the process – my heart was pounding the whole day I rang my creditors – but you’d be surprised just how useful it can be.

Simply ring them up, one at a time, and explain how you’re struggling to meet their demands. Let them know you *want* to pay it all off and do the right thing, but that you’re in a financial bind right now. Then ask if there’s anything they can do to help.

Not every creditor will be sensitive to your request, but quite a number will be able to offer a payment holiday, reduced or even halted interest payments etc. A few might even be willing to accept a single lump sum to settle your debt that is smaller than the existing sum.

With your newly liberated cash, this is a definate possibility. And even if not, it’s likely that at least one or two of your creditors will give you some kind of preferential treatment simply for having the balls to ring them up and ask.

This should further help to ease your financial pressures, allowing you to think more clearly about the future and budget for your debt repayments without you losing too much sleep over the situation.

Make A Debt Repayment Plan

Lastly, once you’ve reduced your expenses, sold some old stuff and seen what your creditors can do to help it’s time to go ahead and make a proper financial plan for your debt repayments.

Use your spending figures from earlier, the extra cash you now have, and any reduced rates, and go to town to hammer out a repayment plan that will not only meet all your creditors terms but also allow you to have some kind of life while paying them off.

Then put it on autopilot – ensuring that your debt repayments go out every time you’re paid automatically. Doing so means those bills that arrive in the post won’t worry you any more. There’s nothing quite like getting bills – like I do – that remind me I need to pay “zero” because the payments have already been taken care of!

Not so long ago Richard was drowning in debt, dodging creditors at every turn and working a 60 hour week to try and make ends meet. Now his financial life is back on the straight and narrow he loves to show others how to save money and gain control of their finances. For plenty more tips visit Frugality Magazine on Pinterest.


Tired Of Breaking Resolutions? Make Long Terms Plans For The New Year

long term planningAs soon as the 1st of January strikes, we all make plans to give up on the junk food we love and kick start our exercise plans. Unfortunately, most of us fail with our resolutions nearly as quickly as we started as they are usually short term fixes. If you want to make changes which you stick to, it is important to make longer term plans so you have more chance of succeeding. A careful plan of what you want to get from your life will give you some goals to work towards and a much better focus for the future. Clear Debt If you want a fresh start with your finances, the most important step is to clear your outstanding debt. A clean slate with your finances will give you peace of mind and get you on track for the rest of the year, right from the offset.

If you are struggling to make monthly debt payments, you can contact your lenders and try and reduce these or make use of debt management services to deal with your lenders for you. They will be able to negotiate better rates for you or reduce the payments you need to make. A debt free start will help you to improve your credit rating so you can take out finance for other things in the future, which will give you better prospects in the future.

Improve Career Prospects Better career prospects are a good way to improve your finances and self-esteem and the beginning of the New Year is the ideal time to start your job search. January is usually quite a big time for recruiting as employers are planning for the year ahead, so it is the ideal time to get a good head start. If you don’t want a new job but just want to develop in your current role, the start of the year is a good time to sit down with your manager and talk about your career development plans for the year ahead.

Embrace New Hobbies The more hobbies you have, the more fulfilled you will feel so take up as many of these as you can. If you are not quite sure where to start, you can take up an evening class in almost any subject these days which will really help to broaden your horizons. There are plenty of hobbies you can take up and do at home which can offer a way to make some extra money, such as crafts and writing. There is nothing worse than sitting around the house feeling bored, which is why some new hobbies will really help you to get more from your life. Widen Social Circle A new year offers fresh enthusiasm and motivation to make your life better and one way you can achieve this is by widening your social circle. The more people you have in your life, the happier you will feel and there are always opportunities to meet new people and broaden your circle. If you decide to take up a hobby or a new job, this will provide you with a great opportunity to meet new people who share similar interests.

Travel the World There is a big wide world out there so a new year should be the time to think about embracing it. If you have the time and money, travelling the world is a great way to open your mind and experience new things. You will feel much more satisfied if you have experienced a bit of the world and it also gives another opportunity to meet new people and expand your social circle. If you have commitments that prevent you from travelling, it is a good idea to visit different places when you go on holiday, rather than sticking to the tried and tested. Challenge Yourself The only way to develop as a person is to challenge yourself as often as possible. If you have always wanted to sky dive for instance, take the leap and try it out as you will feel much happier and more satisfied with yourself. Life can become mundane if we don’t challenge ourselves so start the year as you mean to go on.

Jasmin Blunt is a blogger who made changes in her life to sort out their debts this coming year by seeking help from debt management services. If you are struggling with debts and want to start your year as you mean to go on, debt management is the perfect way to get your finances back on track.

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How to Fix Your Life When You’ve Spent Wayyyyy Too Much…

Did you spend too much money this year?  You can turn to debt consolidation solutions to manage your credit card bills.  However, this becomes a thorny issue if the you have a bad credit rating due to late or non-payment of debts.  If you find yourself in just such a predicament, you should let out a sigh of relief as you still have one option: a specialized bad credit debt consolidation loan.

Debt Consolidation Loans for People with Bad Credit Ratings

Some might scoff at the idea. How can a person with bad credit rating still get a fairly good deal? Well, there are indeed several companies who will still give a loan with a relatively better rate than the average percentage they could be paying on their credit cards.

Most credit cards explicitly state in their terms of agreement that should a credit card holder fail to pay their balances on time, the bank will raise the annual percentage rate to the default rate. In most cases, the jump in the APR is much higher than the introductory APR. In such a scenario, a borrower may just be paying the interest charges instead of the principal amount. This leads to a virtually endless debt cycle.

Bad Credit Debt Consolidation Options

Bad credit debt consolidation can either be secured or unsecured. What this means is that the lender may extend credit for the borrower’s debt consolidation loan with or without collateral. Collateral is any property of value which the lender may accept as an assurance that should the borrower default on his payments, the lender gets to keep or possess the said property.

Unsecured debt consolidation loans have higher interest rates and less favorable loan repayment terms than secured loans. This is understandable since the lender offering unsecured loans have a higher risk of the borrower defaulting on his loan. The fact that the borrower already has a bad credit rating aggravates the risks. Thus, the lender will charge high interest rates to offset possible default.

In the case of secured debt consolidation loans, the borrower can get better rates and terms. The lender in this case, has less risk than the unsecured loans lender. If the borrower defaults, he holds the deed to the borrowers’ property so he can easily recoup his losses.

Benefits of Bad Credit Debt Consolidation

The borrower will get to rebuild his credit record once he has obtained a debt consolidation loan. For instance, a borrower used to have debts from ten different lenders. With a debt consolidation loan, he will be able to trade his 10 different loans for just one. Though the principal amount owed is the same (perhaps with some service charges, too) records will show efforts toward debt burden reduction.

Having only one loan with possibly better rates (perhaps a fixed rate versus the previous variable rates) and better terms (perhaps a lower monthly minimum due) than the previous loans generally means better ability to make payments on the loan. Keeping up the monthly payments is also made easier by the fact that he will have only one lender to pay, one due date to remember and one interest rate to watch.

However, things can only get better if the borrower refrains from taking out another loan. This means curbing his desire to spend and exercising the utmost level of discipline so he can make the required monthly payments on time. No excuse will be good enough if one messes it up, again.

Belind Mills writes articles on personal finance and  debt, more of her articles can be seen at www.irs-easy.com


6 Ways to Relieve the Perceived Hopelessness of Insurmountable Debt

6 Ways to Relieve the Perceived Hopelessness of Insurmountable Debt

Do you feel as though you are drowning in debt, that you will never see the life preserver out there, let alone be able to reach it? If so, you are not alone. Not even close, actually. The world has seen a very different financial climate in recent years. Even the strongest economic areas have felt some of the pain it has brought with it.

Chances are if you are not facing a mound of debt, then you probably know someone who is. So, I am going to share some ideas with you on how to best survive these times, and build yourself back up to get back on track.
The most important thing to know here is that this does not have to be permanent.

1. Be Realistic

The first thing you need to do is take a realistic snapshot of your finances. This will help determine if you can do this on your own, need assistance, or should file bankruptcy. If you make enough money to pay your bills, but have struggled to do so due to lack of discipline, or temporary hardship, you might be better off doing this on your own.
However, there is help out there for those of you who are struggling a bit more than the average person, such as when the ‘temporary setback’ is turning out to be much longer than the bills can handle. Debt consolidation is one avenue you might consider.
This is where you typically pay a fee to a company that goes to bat for you in consolidating your debt, often cutting this debt down significantly. With the right company, you could get out of debt quicker, and pay less…even when factoring in their fees. Do a little research online to learn about your options, as well as get debt help, and advice.
The last option would be bankruptcy, which will affect your life for years to come. More people are going through this than ever, and will be just fine someday. So, if you have no other option, don’t beat yourself up over it.
Regardless of which route you go, the next few tips should be carefully considered as a lifestyle change, to help prevent this from happening again…and to get back on your feet quicker, which is what is most important.

2. Downsize as Best You Can

Take a look around to see what you can do to downsize. Of course, some of these choices might be difficult. If you have more cars than you need, sell one…or two. If the house is bigger than you can keep up with, sell and move to something more realistic.
Most households have more than one TV, game system, and more clothes than they could possibly wear in any given season. Have a garage sale, and then apply what you make to some of your debt. I’m not saying you have to get down to bare walls and a skeleton closet, but we all need to live within our means, even if that ‘means’ changes unexpectedly.
Bottom line is, if you have boat that you only used 3 times the entire boating season, sell it.

3. Lower Your Bills

Of course, we need to live…and not sit in the dark twiddling our thumbs. So, let’s take a look at what we can do to lower our bills, rather than shut them off completely.

  •     Mortgage – refinance, if you can, to get a lower rate. This will not only lower your monthly payment, but also lower the overall amount you pay in the long run.
  •     Utilities – Shop around for the best price for things such as cable, Internet, and phone. If you can’t, or don’t want to switch companies, call them to see what you can do to lower your bills. Most companies will work with you, rather than see you leave.
  •     Usage – Turn off what you are not using, including lights, water, and appliances. Turn the heat down or air up if you are not home. Even if you are, put a sweater on in the winter, or wear shorts in the summer.
  •     Insurance – Call your agent to see what you can do to lower rates. Again, they will want to work with you, rather than lose you. If not, look elsewhere.
  •     Food – Save money by getting creative with leftovers. For example, our local market has these wonderful cooked whole chickens for under $6, which can turn into at least 2 meals if you make a soup out of the leftovers.

Take a look at your bills, one at a time, and ask yourself how you can lower it. There are ways to lower most everything.

4. Set a Budget

Don’t just talk about spending less…set a budget to make sure you do. There is software available to put this all online, which will make it very easy for you. Keep track of every dime you make and spend, as well as receipts to make sure you are entering everything in…and I mean everything. If you buy a pack of gum, enter it.
You might be surprised at how some of your money was spent.

5. Pay off One Debt at a Time

The bills that can…and should be paid off, such as credit cards should be organized by how much you owe, and what the interest rate is. Paying one bill off at a time will help you pay down your debt quicker, than trying to pay it all off…because you will end up paying minimum payments and more interest in the end.
So, if you have 3 credit cards to pay off, try paying off the smaller one first. Then, take that payment (that you no longer will have) and apply to the next one you target. As long as you don’t keep charging, there is an end in sight.

6. Think Positive

Finally, think positive, as difficult as that might be for a while. If you are taking steps to relieve your debt, your day will come. If you let it get to you, it will make things worse. Depression can easily set in when struggling financially, and can lead to a lethargic state of mind and physical condition. When that happens, it makes it difficult to get out of anything, including bed.
Keep your chin up and keep looking forward. Learn from this, make some lifestyle changes, and you will be fine.

About the Author

Kathy Barber is a freelance writer, who writes on topics such as medical, online business, and home brewing. Her latest series was inspired when talking to others about on how to reach financial freedom. She did most of her research online and found www.debtmanagementplans.uk.com very helpful. Kathy lives in Michigan with her husband and son. When she is not working, she enjoys time with the family, cooking, entertaining, music, and photography.


What is the Future of my Debts if my IVA Fails?

What is the Future of my Debts if my IVA Fails?

If I may ask you, what is an IVA, and then the best answer for it would be, an IVA or individual voluntary arrangement is extensively used for resolving personal debt problems. It is a repayment plan (fixed term) that is designed especially to help someone who is facing a crucial debt problem. This repayment plan gives one the chance to repay the reduced payments to their creditors and protecting their own assets from serious threats of bankruptcy and legal action. This legal agreement came into being on 29th December in the year 1986 as a part of Insolvency Act and it brought major changes in UK as far as personal insolvency was concerned. Normally an IVA lasts for a 5 year fixed period. The term is fixed and once it is agreed upon even a creditor do not have the right to change it.

It has been seen that IVAs have mostly proved to be successful. But they have even failed during certain instances.  There are times when people go for an IVA but discover after a certain point of time that they won’t be able to afford their payments. However, as you cannot start an IVA unless it is actually proved that you are able to make your payments these situations do not usually arise.

In most cases people find it difficult to make their monthly payments when their income unexpectedly falls. This may result from loss of their jobs or new baby or even prolonged period of illness.

What are the options if an IVA fails?

If an IVA fails there are plenty of options that can come to your rescue. Let us have a look at few of them:

  • A Payment Holiday: The first and effective option is to go for a payment holiday. This gives you a break temporary for a period of 2-3 months from IVA payments. This gives you a chance to search any new job or even overtime for arranging the money required for your payments. The payments that you have missed are added to your IVA. The payment holiday option works only when the drop in your income is for a temporary basis. But the drop is permanent then you will have to think of any other variation to the IVA.
  • IVA variation: It refers to reducing your payments that you give for IVA after signing a formal agreement with creditors. You will then have to increase the number of your payments and compensate for your lower payments every month. For varying an IVA you will require the help of insolvency practitioner who will propose variations to the creditors. The proposal gets accepted id it seems to be reasonable.

Future of debts if IVA fails

If certain circumstances arises that you are not able to make payments to IVA then there are chances of its failure.  It may not fail even in such situation if and only the agreed payments have been made by you. But if you are in your earlier stages of payment then there are chances of failure.  It will result in huge debts that may become impossible to repay. In such a situation, the best options are starting a debt management or declaring bankruptcy.

You should go for any option depending on your personal circumstances and after taking advice from insolvency practitioner. However, bankruptcy option is considered better by most people as the payment that goes into any debt management plan is so less that it would literally take years for resolving the debt. It is always an intelligent decision if you do not consider an IVA unless being very confident of the fact that you can afford to maintain your payments.


What Is Debt Management?

What Is Debt Management?

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If you are like 70% of all Britons, at some point in your life you will hear this term, debt management.  You also may hear terms such as IVA, DMP, and bankruptcy.  But what is debt management, debt management plans, and things such as IVA, DMP????

Jon at debt management company said that he has seen an increase in the number of people looking into debt management plans and IVA’s mostly due to being made redundant and also the increased cost of living.  As the cost of petrol and food and heating one’s home has increased, people have less money to service the debts they have, it is at this point they seek advice as to what they can do.

We all know, or most of us know of bankruptcy.  When you are insolvent, meaning your liabilities exceed your assets, which basically means you cannot afford to pay your bills and debts, you can go bankrupt.

But what if you want to avoid bankruptcy, for whatever reason.  Maybe you have a property that you don’t want to lose and would lose if you were to go bankrupt, or maybe you feel a moral need to try and pay back your debts.  What can you do??

Debt management, that’s what you can do.

Debt management is basically a term used to manage one’s debts in a manner that you can afford, not what your creditors or banks are telling you to do, but in a way you can afford to repay them.

For example let’s say you have a few credit cards, an overdraft, and a personal loan all of which total about £15,000.  The accounts are in just your name, you own a property, and have been paying all your bills just fine.  Then one day your line supervisor advises everyone at your job that business is slow and work hours are going to be reduced.  You suddenly are earning less money and now cannot afford to pay all the minimum payments on your loans and credit cards.  You struggle and start to fall into arrears.  the banks are phoning you or worse yet, collection agencies are ringing and asking for money, money you just don’t have.

What can you do?

Get advice on various debt management options that are available and you qualify for.

So what are the options for our imaginary friend with 15K of debt, a property, and not enough money to pay what the banks and collection agencies are asking for?

What our friend can do will depend on a few factors, one is the amount of debt they have, which we know is £15,000.  The next factor is how much can they afford to pay, not how much the banks and collection agencies want them to pay, and lastly, is there any equity in their property??

How it is figured out as to what our friend can afford to pay is done by a detailed income and expenditure form, which is competed by the assistance of a profession adviser.  Our friend could do this himself, but not being a pro at this and it not being their usually job, it is best to seek profession advice.

In this income and expenditure form, our friend’s wages are listed and any other income they may be receiving, tax credits, etc.  The form also shows all their outgoings and bills, things such as their mortgage payment, council tax, electricity and gas, and other fixed monthly expenses.  Then an amount is allowed for food, petrol, insurances, and any other monthly expenses our friend may be experiencing.  This I&E does not include any of their debts or accounts, credit cards and the such.

Then what our friend has a surplus, after their living expenses, is what is used to determine what will be paid to the creditors, and it will also dictate what form of debt management will be best for them.

The adviser will also look at our friend’s property, not physically go and view it, but ask if there is any equity in the property.  This also will help determine what form of debt management is best suited for our indentured friend.

If they only have a small amount of surplus, say £150, then bankruptcy or a debt management plan/DMP are options.  However if the property has equity in it, then bankruptcy may not be a good option as our friend could lose his house if they were to go bankrupt.

If there is no equity, and our friend has no real surplus, then bankruptcy is an option, although they could still consider a debt management plan.

If our friend has more then £150 as a surplus of income, an IVA or individual voluntary arrangement is an option.  An IVA would allow our friend to repay the debts in a manner they can afford, and also preserve the property, but if there is equity, in an IVA a portion of any equity is to be released at the end of the IVA.

Basically here is how both forms of debt management work:

Debt Management Plan/DMP:

*offers flexibility in the monthly payment, you pay what you can afford

*works for people who have a large amount of equity in a property, more equity than their actual unsecured debt

*no minimum amount of debt is required

*not a formally binding agreement, creditors do not have to accept the proposal, they will take the payments you make, but can still chase you for more

*  can be a good short-term option if you know your circumstances may change

*can be a stepping stone to later do an IVA

*no reduction in the balances on the accounts, you pay unto the account is paid in full

*creditors may not freeze the interest

Individual Voluntary Arrangements/IVA:

*Formally binding agreement with your creditors

*The accounts are frozen so no new interest or charges are accruing

*A way to preserve property as in bankruptcy you may lose the property

*Is a five (5) year term, at the end of the five years you are debt free

*Need a minimum of £15,000 of debt

*Creditors reduce the balances on the accounts, you pay back a pence on the pound percentage

*A formal arrangement with your creditors, they agree to accept the payments you can afford and you are not chased for any additional payments

So as you can see each form of debt management has positive aspects about it, and for those looking to avoid bankruptcy, some form of debt management hopefully will fit their set of circumstances.


What are they and what are the differences between debt consolidation loans and debt management

What are they and what are the differences between debt consolidation loans and debt management

A friend of mine had recently mentioned to me about the confusion between what is a debt consolidation loan and what is debt management.  This didn’t really surprise me as many consumers, borrowers, debtors, etc, can be confused by the various loan products and banking/financial terms used today.  Basically unless you are in the banking industry, or a debt adviser, you may not fully know the differences between these two very different options.

Debt management is where someone may be struggling with various credit cards, overdrafts, loans, etc and can no longer service the debts in accord with what the accounts or their creditors are asking for payments each month.  So the debtor, seeks help and assistance via some other form of repayment, usually through a third party, in managing the debts through alternative means.

This assistance can be in the form of a DMP/Debt Management Plan, or possibly an IVA/Individual Voluntary Arrangement.

Debt consolidation is where someone may take out a loan to consolidate, or pay off the smaller loans and credit cards they may have.  This gives them one monthly payment, and in some instances a lower monthly payment, than what they had previously been paying to the smaller multiple accounts.

Debt management is not a form of a loan and no money is lent, whereas debt consolidation is a loan that is applied for from a bank or lender and can be granted or denied.

In debt management you are usually in arrears with a loan or credit card and this has affected your credit, and by being in some form of debt management, this also affects your credit.

Debt consolidation does not affect your credit, and you may have poor credit prior to receiving the loan, but for some people, the deb consolidation loan itself may help to improve their credit.

Both, debt management and debt consolidation allows you to make one monthly payment instead of multiple payments.  With debt management the monthly payment is based on what you can afford and again impacts your credit.  In debt consolidation the monthly payment can be less than what you previously had been paying to the multiple accounts, and it doesn’t have a negative mark on your credit. The debt consolidation payment is based on how much you are borrowing, the interest rate, and for how long you are borrowing the money.

So in discussing this with my friend, I asked him how he determines which option is best for his clients.

He stated, if someone is currently in arrears with their credit cards and accounts/loans and possibly has experienced a major change in their finances, hours cut at work, made redundant, etc, and then debt management may be a stronger option for them.

If they are just looking to reduce their monthly outgoings and want to budget a bit better, then a consolidation loan may be a better option for them.

If their credit is already showing late payments and defaults, then a form of debt management may be the way to go.

If they are concerned about your credit rating and want to maintain it, then debt consolidation is what they may want to look more into.

So there you have it, straight form the horse’s mouth, so to speak, not only the difference between debt management and debt consolidation, but also a professional’s advice on which may be best suited for someone.


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