As the saying goes, “money makes the world go round”. However, in today’s highly consumeristic society, many people are struggling with debt. According to a report by the Money Charity, the total consumer credit lending in the UK alone reached £218.5 billion in December 2019. The concerning part of this statistic is that a lot of these consumers are dealing with multiple types of debt such as personal loans, credit card debts, car finance, and overdrafts. The fact that debt can lead to stress, anxiety, and overall poor physical and mental health underscores the need for debt management advice.
Debt management advice aims to help individuals struggling with debt to remain in control of their finances by devising a plan that matches their circumstances. With this guide, we aim to provide to the reader an overview of the debt management process, including a step-by-step guide, a list of sources of advice, and the pros and cons of specialized debt management plans.
Step by Step Guide to Debt Management
1. Assess the Debt
The first step in managing debt is to assess the amount of debt that the borrower has. It is vital to identify who they owe and the total owed amount. The best way to achieve this is to list all creditors and their respective debt balances.
2. Prioritize the Debt
Once the total debt is assessed, the next step involves prioritizing the debt. Prioritization involves noting the highest interest debts which are costliest and thus need to be paid off first.
3. Create a Budget Plan
Once the debt is prioritized, the next step is to create a budget. Creating a budget plan may involve reducing unnecessary expenses, considering ways to supplement income or allotting more funds towards repayments every month.
4. Consider Reducing the Interest Rate
Reducing the interest rate is another way of managing debt. It can be achieved through negotiation with creditors. In some instances, creditors might even offer interest-free periods, or alternatively lower the interest rates permanently.
5. Choose a Debt Management Option
There is no one-size-fits-all solution for debt management. There are several debt management options available, so it’s important to choose a plan that works best for individual circumstances. The options include the following:
Debt Management Plan (DMP) – A DMP involves the borrower making a single affordable payment to a provider who then distributes payments to creditors.
Individual Voluntary Agreement (IVA) – It allows an individual to repay part of their debts in a set timeframe. The rest of the debt is then written off.
Debt consolidation – Involves taking out a loan that consolidates all debts into one payment.
Bankruptcy – A declaration of insolvency that involves writing off most debts and offering a clean slate
Sources of Debt Management Advice
1. Citizens Advice Bureau
The Citizens Advice Bureau provides free debt management advice to millions of people every year. Expert advisers offer confidential and objective advice tailored to the needs of the individual. This bureau is an excellent resource for anyone seeking free and unbiased advisory services.
2. National Debtline
The National Debtline provides help and advice to individuals struggling with various types of debt. They offer free and impartial debt advice through various media including telephone, webchat, and email. The National Debtline has established itself as a trusted service provider, and their advisory services are helpful for many people.
3. StepChange Debt Charity
The StepChange Debt Charity is another free debt management resource. The services they offer include debt management advice, negotiating with creditors on behalf of the debtor, and creating long-term debt plans. This charity has helped thousands of individuals overcome debt-related issues.
4. Debt Advisory Centre
Debt Advisory Centre provides free and impartial advice on managing debt. They offer a broad range of services such as debt consolidation, bankruptcy advice, and debt management. They also offer online tools like debt management calculators and loan eligibility calculators.
Pros and Cons of Specialized Debt Management Plans
Debt management plans offer a tailored solution to debt-related problems. However, like any other option, they come with pros and cons. We will highlight a few of the key benefits and drawbacks of the most common debt management plans below.
1. Pros and Cons of Debt Management Plan (DMP)
Pros:
– Monthly payments can be reduced
– Offers a more structured way of managing debt
– Automatic stoppage of direct communications from lenders
Cons:
– Limited capacity to negotiate new terms including interest rates and account freezing
– Can impact credit score
– Length of time it takes to repay debt
2. Pros and Cons of Individual Voluntary Agreement (IVA)
Pros:
– Protection against court action or bankruptcy proceedings
– Affordable monthly payment plans
– Legal and financial expert assistance provided during negotiations
Cons:
– Credit score is affected for six years
– The debtor has to meet specific criteria to qualify
– Can be a lengthy process to put in place
3. Pros and Cons of Debt Consolidation
Pros:
– Combines multiple debts into a single payment
– Lower interest rates possible
– Fewer creditors to deal with
Cons:
– Repayment terms likely to be longer
– Consolidation loans can have high origination fees, which add to the overall cost
– Creditworthiness of the borrower can impact eligibility
Conclusion
Debt management advice is critical in today’s world where people are struggling with multiple debts. With the right plan in place, debt management can create a path to sustainable financial stability. It is important to remember that different debt management plans exist, each with its own set of pros and cons. To ensure a successful debt management plan, individuals need to select an option that suits their circumstances. Additionally, they should seek advice from reputable sources such as National Debtline, StepChange Debt Charity, Citizens Advice Bureau, and Debt Advisory Centre. With the right knowledge and tools, anyone can overcome their debt-related challenges.
What is Debt Management Advice?
Debt Management Advice is an informational and strategic methodology and ideology implemented in order to provide crucial insight and education for individual debtors ranging from private debtors to commercial debtors.
In order to get the best debt advice to meet the needs of your current situation, you are encouraged to explore the vast expanse of debt resources, planning, programs, and assistance available; while circumstances vary in accordance to the given situation, a wide range of Debt Management Advice is available in order to address the wide range of individual circumstances – due to the fact that the origins, loans, and legality is subject to vary on a person-to-person basis, legitimate programs and institutions exist to meet the needs of any and all individual debtors.
A Guide to Debt Management Advice
The following examples of Debt Management Advice are available for undertaking in the event that you wish to resolve, restructure, reorganize, or simply further educate yourself about the legal parameters and procedures concerning debt resolution:
Recommendation-based Debt Management Advice
Amongst the most viable and effective means of attaining legitimate Debt Management Advice is seeking out the advice of trusted friends, colleagues, and networks who have undergone debt resolution and management; upon seeking the advice of trusted resources who have participated in Debt Management Advice, you may be able to gain initial acclimation to debt assistance programs offered prior to undertaking them:
On one hand, seeking out the advice of trusted networks and individuals may assist you in preparation and understanding regarding the requirements and practices involves in the process of debt resolution through Debt Management Advice; on the other hand, the participation – and completion – of such Debt Management Advice resources by a trusted network may prove to be an effective filter for avoiding illegitimate scams and illicit, fraudulent Debt Management Advice resources.
However, you are encouraged to solely seek the advice of individuals and professionals whom you trust – in addition, you are also encouraged to undertake legal or professional financial counseling prior to choosing a Debt Management Advice resource.
Legal Debt Management Advice and Counsel
In the event that you are unable or unwilling to seek out the opinions of trusted friends or networks, undertaking legal counsel through a certified and accredited attorney specializing in debt legality, the analysis of Debt Management Advice resources, and the provision of debt management strategies is considered to be amongst the most reliable and efficient options:
Attorneys may be available for hire on the basis of a sliding scale in order to meet your financial needs and abilities; in other cases, pro-bono and non-profit legal assistance may be made available to eligible applicants with regard to the investigation process of Debt Management Advice resources.
An attorney specializing in the analysis and formulation of debt management strategy and procedure may allow clients to undertake multiple enactments within financial-based resolution and relieve programs.
