More and more people are resorting to debt management programs because they are finding it difficult to manage their finances. The main cause of concern for many is how to manage debt?One can manage his debt all by himself or hire the services of a debt managing firm.
Managing debt on your own:
When a debtor has decided to manage debt on his own, there are several steps he needs to follow:
* He has to evaluate his financial situation.
* Work out those areas, where he can do without spending money.
* Depending on his income, work out a budget and try to manage his finances in accordance to the budget.
Taking the help of a credit counseling agency:
More appropriately referred to as a Credit counseling firm, these firms help in reducing the Annual Percentage Rate of a debt account and consequently the borrower has to make a lower payment every month.
Working of the debt management program:
Once a debtor has opted for the debt management plan, the program follows the following course:
* The credit counselor gathers information about the debt accounts of the borrower. This includes the debt amount, the interest rate, amount payable every month and other details.
* The credit counseling agency then works out a budget for the debtor and makes the borrower aware of the importance of money management
* The counseling agency (after the debtor has registered for the DMP) has the authority to work on behalf of the borrower.
* The credit counseling agency negotiates with the several creditors and tries to work out a payment so that it benefits the borrower. This includes reduction of the interest rate.
* Once the amount to be repaid and the repayment schedule are worked out, the borrower is required to pay the counseling agency an amount as mentioned in the repayment schedule. Thereafter, the agency distributes the money to the creditors.
Managing debt on your own:
When a debtor has decided to manage debt on his own, there are several steps he needs to follow:
* He has to evaluate his financial situation.
* Work out those areas, where he can do without spending money.
* Depending on his income, work out a budget and try to manage his finances in accordance to the budget.
Taking the help of a credit counseling agency:
More appropriately referred to as a Credit counseling firm, these firms help in reducing the Annual Percentage Rate of a debt account and consequently the borrower has to make a lower payment every month.
Working of the debt management program:
Once a debtor has opted for the debt management plan, the program follows the following course:
* The credit counselor gathers information about the debt accounts of the borrower. This includes the debt amount, the interest rate, amount payable every month and other details.
* The credit counseling agency then works out a budget for the debtor and makes the borrower aware of the importance of money management
* The counseling agency (after the debtor has registered for the DMP) has the authority to work on behalf of the borrower.
* The credit counseling agency negotiates with the several creditors and tries to work out a payment so that it benefits the borrower. This includes reduction of the interest rate.
* Once the amount to be repaid and the repayment schedule are worked out, the borrower is required to pay the counseling agency an amount as mentioned in the repayment schedule. Thereafter, the agency distributes the money to the creditors.
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