| By
Ann Gibson
Before delving on what a debt management
plan can do for you as an individual or as a business, it
will be good to decide its scope. It is a misconception among
many people that debt management plans can only be used for
eliminating the existing mound of debts. Nevertheless, debt
management plans have an extended scope. As the name suggests,
debt management plans may be used with advantage to manage
the debts to a particular level. It must be acknowledged that
a proper management of debts makes debt consolidation and
other methods employed to fight the menace of debts superfluous.
Prevention is better than cure. Most of us repeat the adage
incessantly. It will be through debt management plans that
one can really develop the habits in ones life and dealings.
However, the role played by debt management plans in working
with the debts already
incurred may not be discounted. Many
people owe their financial survival to the debt consolidation
loans that helped them counter bankruptcy and other debt related
problems.
The author has tried to illustrate the preventive as well
as defensive uses of debt management plans through this article.
Since the defensive part of the debt management plan is more
widely used, we will first discuss the various plans to deal
with debts that an individual or business has already incurred.
The various debt management plans that come in this category
are as follows:
• Debt consolidation loans
The most conventional method of dealing with debts is debt
consolidation loans. Debt consolidation loan is essentially
meant to arrange easy finance for clearing the mound of debts.
A single loan is drawn after consolidating the various debts.
One aspect that distinguishes debt consolidation loan from
other loans is that the borrower gets help and guidance from
the debt consolidation loan provider in the settlement of
debts. Expert negotiation skills and a proficiency in debt
settlement recommend the services of the debt consolidation
loan provider in this regard.
• Debt consolidation mortgage
Debt consolidation mortgage constitutes a major part of the
debt management plans. A debt consolidation mortgage is
basically
a second mortgage. In this method, the borrower requests the
mortgagee who holds the first mortgage to the home to repay
his debts. In exchange, the borrower includes the debts while
making the monthly repayments. The advantage of the debt management
plan is that finance is available for debt consolidation at
rates equivalent to a mortgage, i.e. at cheap rate of interest.
•Debt consolidation through
remortgage
While debt consolidation mortgage entails dealing with the
same mortgage lender, debt consolidation through remortgage
involves shifting to a mortgage lender who offers a better
rate of interest. In this debt management plan, the borrower
or the mortgagor requests the new mortgage lender to include
several debts along with the unpaid amount on the original
mortgage for disbursement. Again, this will help the borrower
get cheaper finance for debt consolidation at the rates of
a mortgage.
• Debt consolidation through credit cards
Credit card as a debt management plan will be especially useful
when the debtor wants a quicker settlement of debts. As in
loans and mortgages, a credit card user need not wait for
the debt management plan to be approved and sanctioned. Another
advantage of credit cards as a debt management plan is that
borrower is not required to pledge any of his/ her assets
to back the loan. This can however be too expensive for the
credit card user.
• Debt consolidation through home equity loans
Home equity loan is a secured loan taken against the equity
in ones home. Home equity loans put a convenient method of
debt settlement. A home equity loan is a multi-purpose loan
that can be used with equal advantage whether in a debt management
plan or for making home improvements. Since home equity loan
is secured, it provides cheaper finance. However, the borrower
needs to be regular in making repayments to protect his house
from repossession.
• Debt consolidation through debt settlement
This form of debt management plan involves associating with
a debt settlement company. The debt settlement company undertakes
to repay the debts while the debtor repays the amount through
small monthly instalments to the debt settlement company.
As discussed above, the preventive methods are equally important
tactics employed to avert the occurrence of debts. Debt counselling
aims to impart debt management training to individuals as
well as businesses. People are taught the manner in which
to manage their revenues. Many of the tips provided as a part
of the debt counselling techniques are time worn. The aim
of debt counselling is not to recall these techniques, but
to help people through innovative ways and means to employ
these techniques in their life.
The defensive debt management plans having repaid the debts,
do not give sufficient guarantee of the menace of debts not
raising its head again. There is a need to end the cycle of
the debts, and the preventive part of debt management plans
will be especially helpful on this count.
Summary
For most of us, debt consolidation loan is the only debt settlement
technique available to people. The article has classified
debt management plans into defensive and preventive. The defensive
part of debt management plans include the techniques to repay
debts that have already been incurred. These include debt
consolidation loans, debt consolidation mortgage, debt consolidation
through credit cards etc. the preventive part of debt management
plans includes debt counselling which offers training to people
about how to manage their limited income. Read more about
debt management plans in the following article.
Loan borrowing is like once in a life time decision and much
is at stake. It is indeed not a good thing that many people
are misguided into taking loans that are not appropriate to
their financial situation. This leads to many allied misgivings.
As a financial consultant the only driving force of Ann Gibson
is to provide proper knowledge. Because knowledge in respect
to loan borrowing is power and exudes financial benefits.He
works for ukdebtconsolidations.To find a uk debt consolidation
loan,debt management that best suits your need please visit
http://www.ukdebtconsolidations.co.uk
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