If mounting debts are becoming an unbearable burden, then it is strongly advisable to seek advice rather than ignoring the problem. Debts can swiftly spiral out of control and they can have a negative impact on health and family life. There are many effective and practical solutions that can be put into place very quickly. This means that debts become manageable and a relatively normal life can be resumed. Debt management is a popular remedy for people having problems paying what they owe.
What is debt management?
Debt management is a process where creditors agree to accept a smaller amount of money each month. This system reduces the overall monthly burden and ensures that payments are much more manageable. From the creditors’ perspective, they know they will be paid, albeit at a somewhat slower pace. This means that they will often hold off from taking more aggressive action to pursue payments, such as levying default charges or calling in debt collection agencies and bailiffs.
Who is debt management for?
Anyone who has very large debt repayments or anyone who does not have any spare income to make repayments, however small, should consider other potential routes to solving their debt problem. This solution is most helpful for people who do have some spare income but who have debt repayments that are beyond their current ability to pay. For example, a situation that is very common these days is couples who have taken out loans based on them having well-paid and secure jobs. Prior to the recession, it was easy to make repayments and there were never any issues about accepting credit and paying it back. However, in the gloomy economic climate, even the most secure jobs have become precarious and people are having their hours cut and pay is being frozen or reduced. This all adds up to many households having more money going out than they have coming in.
What about cutting back?
Of course it is possible to put together a stringent household budget and look at areas to cut back. But it is important to be realistic about how possible this is. It may be feasible to live on a very strict budget in the short term but longer term it can cause problems, not least because it is impossible to foresee every likely expense. It only takes a vital appliance to break down unexpectedly and the whole budget is thrown off course. More often, it can make sense to set up a sensible debt management plan which means that debts are still being paid off without the family having to suffer undue hardship.
Can I do it myself?
Yes, it is possible to set up debt management without any external assistance. Many people approach their creditors and negotiate more appropriate terms. However, some people find that approaching companies to whom they owe money can be a stressful and embarrassing experience. In addition, if the debts are with lots of different creditors, it means having to deal with many companies each month and remembering to make payments. This can be hard to coordinate and it is easy to slip up and miss a payment. Missing a payment risks invalidating the agreement with the company in question and they may then levy default charges or take more aggressive debt collection action.
Who can help me?
There are lots of organisations that specialise in setting up and managing debt management plans and you can find out more at www.directgov.uk. A debt management service will usually examine your budget to determine what repayments are possible. They will then liaise with all of the relevant creditors to negotiate a sensible repayment plan and set an agreement in place. In most cases, they will take a monthly payment from you and then distribute this to creditors on your behalf, meaning that you can rest assured that your debts are being paid off.
Debt management means managing your finances so that your creditors are satisfied that you are willing and able to repay them over a period of time. But more importantly, it means that you can have a reasonable standard of living and remove the terrible worry that being in debt can bring.
This article was brought to you by Paul O’Hara in association with the http://www.debtadvisoryline.co.uk, best UK debt management provider in 2008, 2009 and 2011.