Managing your debts
It is easy for debt to get out of control. Student loans, losing your job, becoming ill or any number of other unforeseen events can easily cause debts to mount up. Even more commonly, simply spending too much on credit and store cards will have the same effect. If this has happened to you, a debt management program may be for you.
Debt Management Programs
A debt management program will work with you and your creditors, such as credit and store card issuers, to find a viable way for you to pay back debts that have simply grown out of hand. While you will have signed agreements to make certain payments and be subject to certain charges, creditors will often be willing to work with you if it turns out that you are unable to meet your commitments. After all, the alternative for them is to engage in costly debt collection arrangements or even make you bankrupt. These are situations they will be trying to avoid simply because they may get a bad return at the end of the process.
So negotiation may get your interest rates lowered, late payment penalties cancelled or suspended, and you loan may be extended so you have longer to pay it off. Another reason they will be willing to accept it is that they know that once consumers have entered a debt management program, they are making a commitment to avoid further debts, and work to pay off their existing ones.
When you negotiate with them you can show them your income and outgoings, and also show them the percentage of your income that will go towards paying off the debt. It will typically only amount to a percentage of the total you should be paying them but if they are willing to accept it, that’s all that matters. As long as it looks like you’re making a real effort, and their debt is likely to be repaid over a reasonable period, they should be willing to give it a chance. Being paid slowly is far better than not being repaid at all, which is what may happen if you are made bankrupt.
Another option for managing debt is to take out a . Usually this will only be an option if your situation has not become too bad, or if you have some security to offer the lender. It is a good way of significantly reducing your monthly outgoings while keeping up with all of your obligations. You should be careful though that if over spending has been a problem for you in the past, you do not slip back into the habit once you are back on your feet.