Knowing the right path to take when facing debt issues is not an easy decision since you will be faced with a number of options with too much to process. You can research as much as you like but it is better off to find advice from an expert who will offer the ideal recommendation depending on your circumstances.
a) Use a debt management program(DMP)
Managing debts all by yourself is not that easy. A debt management plan by a credit counselor can help you achieve lower rates and ace your penalties removed. The counselor negotiates with your creditors so that your terms become easier. A DMP consolidator collects your installments and repays the creditors. The best agencies require some maintenance fees, but it is advisable to do thorough research before choosing a consolidator. Beware of debt settlement companies which are profit-oriented and promise to settle all your liabilities without a DPM. Such options do not have feasible terms and you’d better manage your own debts.
b) Make a priority list of your debts
You must know what debts are most important every time you create a budget plan. Rent and mortgage should be part of the priorities. Missing repayments of such debts could have your house repossessed. Other debts on the checklist should include taxes and VAT, business license, court fines, and utility expenses. Ensure that you plan for the unsecured debts too. Consider boosting the interest rates of your credit card debt so that you can repay the loan in a short amount of time.
c) Credit card debt consolidation
This involves integrating different loan bills into a single debt. The debt is then paid with one monthly installment. If you have a student loan, you can make your life easier through loan consolidation which offers new rates of interest and monthly installments. Basically, you get a variety of repayment options to use. A consolidated loan can have a lower monthly repayment than a regular loan. This regime helps to determine debtors who qualify for debt-redemption.
d) Lower rate card debt transfer
There are certain credit cards which have no teaser rate for any money transfer in a limited period of time. Basically, you will pay a transfer charge of about 3% - 4% of the loan balance. You have a chance to repay the remaining debt before expiry of teaser rate. This grace period is normally 1 – 1.5 years, after which, the teaser rate shoots to a higher percentage.
e) Budgeting and negotiation
The very first step to managing debts is analyzing your income, expenses, liabilities, and assets. Then you must have a plan to scale down your spending. The best debt management companies will negotiate for lower rates of interest. This is something you can do for yourself too. All you need is to call your creditor before it is too late. You will be in a better position to negotiate if you have not defaulted any payment.
f) Personal bankruptcy
This should be your last option. If your credit card balances start reading zero, you would keep your important assets like home and car. Note that your loans keep on accruing if you go into bankruptcy but the creditors will not pursue you. After a certain period of non-repayment, some debts like student loans may go back to the original terms. Bankruptcy can thus protect you from liquidating your assets to repay loans.
g) Organize your finances
Review critically how you spend your money. Before you settle for ways to settle your debts, find sufficient information from the experts. You need to come up with a budget plan. A budget calculator can enable you organize your income and expenditure so that you get a clear grasp of your financial position. Another important thing you can do is to find your credit score. Find out your credit report from a professional and make sure it is updated.
Debt management program revolves around understanding the incomings and outgoings of your finances. Expert advisors can help you walk through the pros and cons of every possible solution for settling your debts so that you choose the most ideal option.