Manage Your Debt

For some, depression is cured by shopping. One tends to spend every last peso to buy things which pleases you. Once your cold cash runs out, you rely on your credit card to pay for all the other purchases you have made. You buy new clothes, furniture, gadgets, appliances designer bags and everything you want. At the end of the day, it dawns upon you that you have maximized your credit limit and is now facing the biggest problem: paying back for the debt. Finding yourself in great debt is a situation which you would not like.

If you find yourself in a situation when it is difficult to manage your debt on your own, then it is time for you to look for help. Getting a Debt Management Plan can be one of your options. A Debt Management Plan works this way: you have to list down all your debt, re-assessing your financial status and your current financial capacity, and renegotiating with the lenders. Renegotiating covers interest rates as well as payment schemes. There are companies which offer Debt Management Plans, either for free or for a certain charge.

The role of the company which is handling your debt management plan will be representing your proposal to the creditor. The meeting between the creditors and the company comes in an informal manner. It is the creditor's prerogative to approve the plan being presented or to put in changes to the proposal. How will you know if a company who offers debt management is a good company? Well, a good debt management company prioritizes the debtor's primary needs such as food and living allowances as well as education. The company must also be able to offer practical and attainable paying schemes which will suit the debtor's capacity to pay. The plan which will be offered must be reasonable because it will be pointless to renegotiate when the terms are still not attainable for the debtor. The creditor would usually check the financial status of the debtor to check whether the data presented are true and to know whether the debtor faces the risk of bankruptcy.

Only unsecured debts such as credit card debt, store cards, personal loans and bank overdrafts can be placed under a debt management plan. The credit record of a debtor will be affected when he enrolls or joins a debt management plan. Inability to pay the debt will damage his credit rating.