Want to Clear your Debt? Check Best Debt Management Plan
Want to Clear your Debt? Check Best Debt Management Plan –
The burden of debt is one of the greatest burdens one can carry. Debts that have spanned long periods are especially worrisome. Loans can help you through a difficult financial period if managed well. However, many people tend to manage their loan debt poorly and end up paying for it in a big way.
If you find yourself in a hair situation with your loan debt, there’s no better time to start sorting it out than now. There are a whole bunch of ways for you to start chipping away at your debt. However, the underlying idea is financial discipline. Here are a few ways you can start to clear your debt:
The Debt Management Plan (DMP) –
The Debt Management plan happens to be a subset of the Debt Consolidation Plans. A Debt Consolidation plan is known to consolidate your unsecured debt into a single loan and lets you make periodic single loan repayments. Debt Management Agencies that work with creditors on your behalf to reduce your repayment terms generally offer DMPs.
Credit counseling agencies work with creditors to draw up plans to help you clear debt and pull yourself above the water. When your monthly payment is due, you can make this repayment to these credit counseling agencies, and they will send this amount to your creditors. The debt clearing monthly plan is created to suit your financial capabilities by evaluating your monthly income power and expenditures.
What are the advantages of a Debt Management Plan?
DMPs are a viable option to clear debt. Here’s why:
- A Debt Management Plan lets you consolidate your credit card bills from many credit cards, thereby making it much easier to clear debt that you may have carried for a long time.
- An excellent Debt Management Plan ensures you cultivate financial discipline, thereby helping you to clear debt effectively.
- Debt Management Plans can enable you to clear debt that is seemingly out of your reach by giving you a monthly repayment schedule that you can follow without too much hassle.
- The use of Debt Management Plans and timely repayments can do a lot to boost your credit score and reports over time.
- Lastly, using a DMP can help you significantly reduce the number of times you get calls from your creditors.
Debt Relief Order (DRO) –
Individuals who have a low amount of debt and not that all that many assets tend to use Debt Relief Orders. You can expect a DRO service providers to kickstart the insolvency procedure to prove that you are unable to make loan repayments immediately to clear debt.
If you choose to opt for a DRO, you can expect it to freeze the payments on your debt and interest rates for a year. However, if your financial plight does not improve by the end of these 12 months, the debts in your DRO will be written off.
Advantages of a DRO –
Here are the advantages of a Debt Relief Order:
- If you are trying clear debt, a Debt Relief Order can undoubtedly make for a better choice than filing for bankruptcy.
- You can expect the Debt Relief Order to help you regain control of your finances to clear debt by freezing your debts and interest rates for 12 months.
- While Debt Relief Orders are considered to be a formulation debt clearing solution, you do not have to appear in court.
Individual Voluntary Arrangement –
An Individual Voluntary Arrangement (IVA) gives you a specified period to clear your debt. This period usually lasts five years. It is a legally binding document, which means that creditors of unsecured loans that are bound to the IVA cannot take any legal action against you during the execution of the IVA. If you choose to opt for an IVA, you ought to keep in mind that the IVA will appear on your credit record for the next six years or until it is executed completely.
Advantages of an IVA –
Here are some benefits of an Individual Voluntary Arrangement
- If you are trying to clear debt that you have accumulated from a variety of sources, it can be a tedious and time-consuming task. An Individual Voluntary Arrangement lets clear debt slowly by allowing you to make one periodic payment instead of multiple payments.
- An Individual Voluntary Arrangement follows a lifecycle, which means that you can clear debt on a fixed date. Therefore, planning your expenses should be easier for you.
- If you cannot manage to repay unsecured debts by the end of the lifecycle, they will be written off. However, keep in mind that you cannot avail the same option for secured debts like mortgages. You will still have to pay off secured debts.
- Once the IVA is in action, any creditor that is bound to it cannot impose extra interest, penalties, or fees of any kind on you.
There you have it – these are a few among many ways to clear debt. Depending on your financial situation, goals, and priorities, you will have to research each of these options in great detail before taking the plunge. Most importantly, you will need to maintain a financial discipline to ensure you get out of a sticky situation like this and clear your debt.