Debt Management
Tuesday, August 12th, 2008
If you owe money to a company it’s known as a debt, and taking the help of a third party to get out of a situation of financial debt is debt management.
In the current economic climate many profitable and non profitable organisations have sprung up to help people in financial credit crisis. Spending less than what you earn does of course reduce the chances of you falling into financial difficulty but in extreme cases a debt management plans will help you keep your personal finances under control.
Debt or credit counsellors, trained in money management, budgeting and credit monitoring will help you minimise the heavy debt and damaged credit ratings with their structured repayment plans.
Generally the debt councilor at a debt mangement company will take you, as the debtor, through a step by step assessment of your current financial situation. A list of your income and expenditure such as rent, loans, mortgage amounts, medical bills, car payments, cost of living and so on is calculated and the total outstanding amount is known as your disposable income.
Next an assessment is completed to acertain what you can comfortably afford to repay towards your debts each month. The debt management company will then undertake a negotiation process with the creditors for payment of debts over a longer period of time and sometimes with reduced interest rates. Most creditors do not hesitate to agree with a debt management plan because, from past experience, they know that the plans are generally successful with regards to repayment of the debt owed.
Sometimes creditors will even lower interest rates and waive certain fees and or charges in debt management negotiations. Debt management plans are generally reviewed at intervals and sometimes with face to face meetings to see that customers are still able to continue repaying their debt until it’s cleared.
A single monthly payment is made to the debt management company who then distribute the required amounts evenly among the creditors, for this service they charge a very nominal rate as service charge, usually 10 to 15 per cent.