A debt management plan is a plan made to manage your debts. A person with high-interest rate debts or multiple debts or unsecured debts usually find it difficult to manage their finances and end up being in financial crisis. Recognising, accepting and managing the debts can be a very stressful time in one’s life. Forming a plan to manage their debts will make it easier to manage the finances and regularize the repayment and thus reduce the anxiety- related problems.
A person should first try to make a debt management plan on their own. In case his plan fails, he should look for a debt advisor. Different debt planners carry different designations. Following are some of the most common debt advisors today and their area of expertise. Certified Public Accountant - CPA's are the best advisors when it comes to tax problems since they deal with the financial statements of either individuals or companies.
Personal Financial Specialist - PFS are basically Certified Public Accountants who went through additional education on financial planning. They are capable of handling a wider range of monetary concerns including taxes. Chartered Financial Consultant - Individuals who are CFC come from the insurance industry and extended their education to pecuniary planning. Their main concern would be in investments.
Certified Financial Planner – CFP are individuals who cover all aspects of monetary planning. It requires three years of experience in order to gain this title which is why they are one of the most adhered to debt advisors. Chartered Retirement Planning Counselor - the main specialization of a CRPC is retirement planning.
These advisors make a plan as per the need of their customer. The six methods which can be adopted to manage debts are:
Debt Consolidation: Here creditors agree to cut down the interest rates and eliminate or reduce late payment charges. Borrower needs to make a single monthly payment to your consolidation company which then distributes the money to the creditors.
Debt Settlement: With this method, the company helps the borrower to negotiate and reduce outstanding debts. He’ll have to pay a fixed amount each month to the settlement company. This amount accumulates into a lump sum and it is then paid off to your creditors.
Debt Management: This involves a credit counseling session wherein a credit counselor analyzes the borrower’s finances and debts. The counselor prepares a budget for so that one can put in more money towards paying his bills.
Self Repayment Plan: This is a self-help plan using which one can pay off bills on his own. It will be successful only if a tight budget is followed on a monthly basis.
Bankruptcy: Filing bankruptcy is last resort as debt solution because it hurts credit rating. Ostrich Method: This method involves ignoring the debt and the borrower hopes it will vanish. However, it is not advisable to ignore debts because borrower’s credit will be ruined if he doesn't pay. Moreover, creditors may sue him or the collection agencies may harass him constantly.
So hurry up and contact us in case you are confused about any of the above mentioned issues or need advice on how to lower your debts.
We offer innovative advice and solutions which will bring relief from debt. We are passionate about helping individuals back on their “financial feet”. Our advisors are expertly trained to talk you through various options such as IVA's, Bankruptcy, Debt Management, Debt Consolidation and Mortgage Repossessions. Whether you are looking for help with debt management, or you would like to know what an IVA is, you've come to the right place.
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