You’re now in debt that you can’t control and don’t know what to do. You aren’t sure if you want to trust your finances with one of those debt management companies that you’ve seen or heard about from friends or coworkers. There are many other options. You can play the lottery, wait for a distant relative to give you a undeserved bounty, or simply dig your feet in the sand, and forget about all the credit card debts piling up on the floor. They’ll likely have the same success rate in managing debt. It’s easy to see how things will turn out, without any drastic changes in household spending or behavioral changes as regards buying habits. But creditors will inevitably get theirs regardless of your attempts at purposeful ignorance. Here’s where debt management comes into play. You don’t need to be worried about entrusting your problems to anyone outside of a trusted and competent firm. To help borrowers in their struggle, debt management counselors will be there to guide them and fully explain each step.
There are steps you can take before you start looking into debt management agencies. Businesses you work with will expect you to look at your finances and make some decisions for yourself. There are some rules that all borrowers should know and guidelines that should be followed throughout the entire debt management process. These rules apply regardless of how wealthy or poor a household’s financial situation. The overall theory of debt management can be thought of as a flow chart. The goal should be to eliminate all future debt. Apart from home mortgages and secured loans, which could be considered investments, and the few credit cards that every consumer should have (with low balances and paid monthly to increase credit ratings and FICO scores), the goal for debt management is to eliminate all debt.
Until you have all the information from each creditor, you won’t be able to assess your debt situation. Write down all the details of your credit cards accounts, including any additional debts. Then rank the obligations from lowest to highest interest rate. You will most likely want to pay off your highest interest rates first. However, there are other ways to eliminate debt. Some debt experts recommend that you take care of the lowest balances first to give positive reinforcement and help the borrower move forward in their debt relief journey. You must still ensure that your minimum monthly payments are made on each account, despite all this. Your checks should be sent as soon as possible so that lenders don’t delay processing the payments or assess further penalties. You should also remember to focus on the highest interest rate debt and then work to pay it off. However, you shouldn’t neglect everyday living costs or avoid saving for unexpected expenses.
There are many things you need to think about when it comes to debt management. You need to consider your monthly expenses, such as gas and electricity, no matter how bad the economy is. It is true that utility companies will be more flexible in collecting debts than the immediate action required to make a missed revolving payment. Utility companies are more flexible than other creditors when they can forgive a few missed payments for a month, without reporting them to credit bureaus. You must remember that the utility company may have to stop services at some point. This can have serious consequences for your credit rating and could even be life-threatening. If there are no lights, you can’t work on the books. You should also remember that any utility service will incur additional fees if it is not restored after termination. These are the costs that may seem trivial to lazy or unwary borrowers. It is not uncommon to pay twice the monthly bill (let’s face it, your water service will be restored) because you have avoided responsibility for a week. As with most things involving debt management you should speak to the representatives of the people you send money to to avoid future problems. Utility companies are open to payment plans that reduce borrower obligations and allow their clients who are less fortunate to lapse their debts over longer periods. The government might even be able to subsidise some utility payments for those who are particularly poor. Although this may sound unsettling, debt management is a dynamic process that has its own momentum. There are also more serious consequences.
It is important that desperate borrowers keep in mind the true dangers of debt management. Regardless of how unfortunate repossessions and lawsuits might be, the real threat isn’t the attack on bank accounts, garnished wages, or the loss or destruction of property. All debts issued by the courts, the state or federal governments should be given a clear priority. Unpaid property taxes will inevitably result in a lien on the property. The owners of the property may also face foreclosure. However, past due income taxes must be paid. Otherwise, the consumer could end up in prison. This could also be true for child support, alimony, or any other debt the courts consider so critical that failure to meet the obligations would result in imprisonment. However, student loans will not land a defaulted applicant behind bars, even though every former college student faces an ethical dilemma. However, almost all loans that were created to support students in higher education are protected by the United States Treasury. This gives them special powers like the ability to garnish income without having to go through a trial. The borrowers don’t have to worry about garnishment because student loans come with such low interest rates and payment terms that span a decade.
No matter what, tax liens or any other debts that can be enforced by the courts and their officers should not be ignored. You should also be extra careful with property debt, especially in light of the current climate regarding real estate loans. The negative publicity surrounding mortgage loan lenders can be dismissed as political positioning. However, due to the countless mortgages and equity loans passed down to home owners who were not able or willing to understand the responsibilities they were taking on, the home lending sector has suffered a serious blow. Refinancing for those already struggling with high-interest debt is difficult. Home equity cannot be underestimated as a sign of financial security. Don’t worry about the potential investment value of your home. Recent trends aside, it’s not unreasonable to assume that appreciation will not continue. This is your shelter and family’s safety net. If you are less than three months behind on your mortgage payments, legal proceedings can be launched to foreclose the home. There may be some flexibility for mortgage defaults, but this is possible due to the current glut of foreclosures in America. It’s still difficult to get back on your feet after missing a payment. The home is the most important asset most Americans will ever make. If you lose your home, there is no point in debt management.
Even if you don’t own a home, you should make sure that you pay your rent on top of managing your credit cards. Eviction proceedings can be more swift than foreclosure. Being evicted can have similar effects on your credit scores and your ability to make a living. When you’re setting aside money for debt management and calculating the amount of money available for credit cards accounts, don’t forget to include your car payment in determining which bills you can ignore. Automobile loans have lower interest rates. They can also quickly repossess your car if they have the chance, which could impact your employment. Not only does debt management refer to the elimination or organization of credit cards accounts, but it also includes a lifetime of paying attention to and organizing any remaining debts.
Problem credit borrowers who had to use shadier finance companies in order to get the auto loan should be especially concerned. Depending on the terms of your contract these companies may not be required to give written warnings before alerting their repossession divisions. Although the interest rates are significantly lower than those for credit cards (which many of them also offer – at sky-high rates, to be certain), these predatory lenders take on the risk of financing in order to profit from the more lucrative repossession market for your vehicle or truck. It is important to keep your payments current as part of debt management. When you are putting together your budget and preparing a schedule of due dates, remember to make sure that auto insurance payments are paid on time. The law doesn’t dictate this, although it should. However, if your vehicle insurance is cancelled, lenders have the right to force you to pay for their insurance. This will carry much higher premiums and a limited benefit. This can ruin any good intentions towards debt management.
Recognizing the different priorities of your debts is important – that’s why this article exists. However, knowing the steps to take to manage your personal debt is just as important as being able to implement a successful program. While an increase in income is obviously the best for every household, it’s not possible to make a significant difference in your outgoing expenses if you don’t have enough income. To truly get rid of accumulated debts, you need to make a change in your lifestyle and behavior. You can reduce unnecessary costs by taking a closer look at your buying habits. To manage your debts efficiently, you must first figure out how to live within your means. Keep your household expenses in check and don’t add any more debts. It may be possible for you, or another family member, to earn additional income through a second or at-home business. This would be a benefit to debt management. Even though this advice may not be appropriate at the moment, you might consider looking for a higher-paying job or a career with greater potential for advancement. Find out what you can do for your financial debts. Although debt management companies can be a great resource, the debts are yours and cannot be swept away by anyone else.
