Debt management: does it work?
If you’re struggling with unmanageable debt and looking for a way out, it’s essential that you find a debt solution to suit your circumstances.
For some people, a debt management plan is an ideal way to repay debt at a more manageable pace. However, as with any debt solution, it’s important to understand what’s involved before making a final decision.
Quick guide to your debt management plan
Basically speaking, a debt management plan is an informal arrangement with your creditors in which you will agree to repay your debts in smaller monthly payments than those set out in your original terms.
It’s possible to arrange a debt management plan on your own, but this can require a lot of negotiation with your creditors, which can be time-consuming and stressful. For this reason, many people prefer to use a debt management company, who can arrange the debt management plan on your behalf.
As well as negotiating for lower payments, it’s often possible to negotiate a freeze or reduction in interest and other charges, which can help to stop your debt from growing any bigger and help you to repay your debts in the fastest possible time.
Will a debt management plan work for me?
As with any debt solution, it may be that a debt management plan is not suitable for your particular circumstances. Your debt adviser will discuss your situation and help to establish which debt solution would best meet your needs.
In general, a debt management plan is best for people with multiple debts who are having trouble with meeting their required payments, but feel they would benefit from repaying their debts at a slower pace.
However, if it seems unlikely that you will be able to repay your debts within a reasonable period of time, then another debt solution such as an IVA (Individual Voluntary Arrangement) may be more suitable.
D | Comment (0)Bad Credit
The term “Bad Credit” relates to having a credit history which may be deemed unworthy of credit by lenders considering a loan or other credit application.
Certain financial products have been developed for those with “bad credit”, and hence are preceeded by it, such as a “Bad Credit Loan” or “Bad Credit Bank Account“.
B | Comment (0)Loans
A loan is a type of debt. The borrower needs to repay the lender the sum of money loaned part by part over time in order to clear the debt.
Acting as a provider of loans is one of the main tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a main source of funding. Bank loans and credit are one way to increase the money supply.
L | Comment (0)Bankruptcy
A legal process for individuals who are unable to pay their debts. All their assets pass to an official receiver for sale towards repaying their creditors. Once discharged, normally in 12 months, the person is relieved from paying the remaining debt.
B | Comment (0)Debt Management
A debt management programme is to manage someones debts without further borrowing which involves negotiating new terms such as lower payments and reduced or frozen interest/charges based on their ability to pay.
D | Comment (0)IVA - Individual Voluntary Agreement
A legally binding agreement between someone who owes money and their creditors. Designed by the government to help people get out of debt, an IVA can only be administered by an Insolvency Practitioner (IP). It is an alternative to bankruptcy, and normally only available to people with £15,000 or more of unsecured debt.
The person agrees to pay a certain amount for a fixed period of time (normally 5 years). Their creditors agree to write off any debt outstanding at the end of that period, and not to take any further action against them.
I | Comment (0)Mortgage
A mortgage loan is a loan secured by real property through the use of a mortgage (a legal instrument). However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.
A home buyer or builder can obtain financing (a loan) either to purchase or secure against the property from a financial institution, such as a bank, either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.
M | Comment (0)Debt
Debt is that which is owed; usually referencing assets owed, but the term can cover other obligations. In the case of assets, debt is a means of using future purchasing power in the present before a summation has been earned. Some companies and corporations use debt as a part of their overall corporate finance strategy.
A debt is created when a creditor agrees to lend a sum of assets to a debtor. In modern society, debt is usually granted with expected repayment; in many cases, plus interest. Historically, debt was responsible for the creation of indentured servants.
D | Comments (2)Secured Loans
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to satisfy the debt by regaining the amount originally lent to the borrower. From the creditor’s perspective this is a category of debt in which a lender has been granted a portion of the bundle of rights to specified property. The opposite of secured debt/loan is unsecured debt, which is not connected to any specific piece of property and instead the creditor may satisfy the debt against the borrower rather than just the borrower’s collateral.
L, S | Comment (0)Remortgage
A remortgage is the process of paying off one mortgage with the proceeds from a new mortgage using the same property as security. The term is mainly used commercially in the United Kingdom, though what it describes is not uniquely British. Often the purpose of switching is to secure a more favorable interest rate from a different lender.
The process of remortgaging does not usually involve moving home or taking out a second mortgage on the property; it is in effect the transfer of a mortgage from one lender to another. Homeowners may choose to remortgage for various reasons, including to reduce the size of repayments, to pay off a mortgage earlier, to raise capital, or to consolidate other debts.
Homeowners often mis-use the expression remortgage when they are simply switching from one product to another with the same lender; this is not a remortgage which involves the removal of one legal charge over a property and its substitution with another in favour of a new lender.
R | Comment (0)