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August 2019

Debt Management Plan

This is one of the best options for people who have difficulty meeting their financial obligations. However, there are other options available and suitability will depend on your individual circumstances. A Debt Management Plan will work best for people who owe £5000 or more and can afford to pay at least £100 each month to their creditors.

Your normal household bills will have to be deducted from your monthly income first and the amount that remains is the amount available for your monthly DMP repayments. Normal household bills include, for example, your mortgage, rent, utility bills, council tax, food and groceries, travel expenses and child care. Many of these are classed as priority so they take precedence over payments to creditors.

Whatever amount is left after all these are paid will serve as the starting point for a DMP. The types of outgoings that can be included in a DMP include unsecured loans and overdraft repayments, catalogue payments, charge cards, credit card bills, payday loans and personal loans from finance companies.

Debt management companies work effectively in two ways. Firstly, they play an active role in helping you to take control of your financial commitments, which primarily deals with the repayment of arrears. These agencies focus on communicating and intervening with creditors and administering payments to them.

Secondly, debt management services involve financial counseling to help you learn how to control future spending. The work of these companies involves explaining the various options to you, including Debt Management Plans, and helping you to choose a custom-made strategy that will enable you to gradually pay off everything you owe to creditors.

The primary concern of debt management companies is to negotiate lower interest rates and easier repayments. Depending on your ability to clear outstanding balances, they can even work with creditors to allow you to pay in full at a reduced sum. These companies can often reach the most beneficial payment arrangements because they have already established good relationships with various creditors.

Should you decide to get professional assistance from an agency, you should initially choose one that will most effectively meet your particular needs. Compare companies through the Internet and read through their specific services carefully. Do they have a wide range of services and are they used to dealing with people in your situation?

Once you have found a suitable company it is easy to apply for help. Many have a simple online form that enables you to submit your details. The company will need to discuss your circumstances further to ensure that they find the right debt solution to suit you so be prepared for a call once you submit your application. To get the right level of help it is best to ensure that you state everything relating to your financial issues.

With the aid of a targeted repayment arrangement that suits your individual requirements you will be well on your way to a healthier financial future. It is important however to be aware of your future spending habits as it is easy to return to the same old practices and repeat the cycle of overspending.

Small Businesses Dealing With Debt

What You Should Do

Of course planning is one of the most important things you can do when running a business, but the problem for many self-employed entrepreneurs is that they don’t do it. In the world of finance, it’s very difficult to track what goes in and what goes out. Timing is also important because most businesses will fluctuate in the amount of business they do. This is why you can’t really plan on a month to month basis. You must look at things in three to six month blocks.

Also don’t forget to set some cash aside for tax and national insurance so that you can pay your taxes on time. This is a common problem for business owners, especially self-employed entrepreneurs. The tax bill is one of the most important bills you have to pay, but you only pay it once a year, so it’s easy to forget about it until the last minute.

Advice to Consider

For help creating a budget you can work with, try using Business Debtline’s budget sheet on their website. Having a budget will help you figure out how much income you can actually take out of the business. That will help you create a household budget and plan for other benefits or income. Once you’ve subtracted your household budget from the business budget, you can see what’s left to pay to creditors.

All business owners should prioritize their debts. For example, priority debts are those that will result in some sort of loss if you don’t pay them. For example, you can’t do business without electricity. If you need your car for your business, then you must pay your car payment. Non-priority debts are those that don’t have as much power to get their money back, like personal loans and credit cards.

If you do end up behind on your payments, then you should take steps to deal with your creditor and make arrangements. Don’t just wait until they take action against you. Most creditors are willing to work with business owners because it’s less expensive for them and they are more likely to be paid eventually.

It also helps to have someone who can give you good business advice. Having a business coach or other business service expert can help you sort through your budget, make payments where they are needed and cut items from your budget if you can afford to sacrifice them. No business owner can afford to be on their own in the world of business. There are just too many variables that you need to be aware of.

Dealing With Gambling Debt

Seek Help for the Gambling Addiction

Before you begin dealing with debt, it is imperative you get help for your addiction. It’s been proven in many cases that gambling addicts are less willing to admit their problems than someone with a substance abuse problem. Not only should you get help for yourself, but for the ones who love you; your family and your friends. Take the time to really evaluate your situation, and how it has affected you, your family and the general quality of living surrounding it all.

Cut Off Funding

It could be half to all of your paycheque, a credit card, or maybe you’ve been dipping into your savings. In either case, put a complete halt on any money put towards gambling. Cancelling a credit card is never a good idea, as it worsens your credit situation and lowers your credit score. But in the grand scheme of things, putting a stop to it now rather than racking up another large amount of money is probably for the best.

You Won’t Win Back what you Owe

Statistically speaking, the chances of you winning back what you owe are next to impossible. In fact, you’re only damaging yourself even more by putting yourself further in debt, and deluding yourself into believing something along the lines of “well I’ll win back what I owe, and then some for good measure!”

Seek Treatment

If you find doing your best and trying your hardest toward helping yourself isn’t working at all, you may need to seek a professional. In some cases, your health insurance provider may cover some or all of the treatment necessary to cure the addiction.

Personal Debt Management

For effective debt management, first you need to split your expenses into fixed costs and variable costs because you can only control (decrease/increase/cut off) these. Rents, fees, insurance premiums etc. will have to be paid the same way. After that you should prioritize your expenses. Your variable costs could be including a $4 magazine that you buy daily on your way to work. Do you honestly need to spend $80 on magazines every month when the same material is available on the T.V and the internet? Debt repayment can be a painful process when you have to cut down on expenses like these but it is worth the pain.

Another method to manage debt is to consolidate your debts. This means combine all debts and have the interest rate revised by your creditor. For example if you are paying 2% on personal loans category A and 6% on personal loans category B, both taken from the; negotiate with your creditor to combine both loans for an interest rate of 6.5 or 7% in return for a shorter payback period. The 0.5% saving could be worthwhile.

Avoid debt managers if you can because the upfront fees that they charge would only increase the costs you are already trying to cut down.

For paying off debt in an effective manner, you must have a list of all debts that you owe. Begin by paying off the debt with the highest interest rate. If you get rid of an 8.5% loan worth $100,000, you would be saving $8,500 per annum!

Out of Control Debt

  • The first thing to do is forget about feeling embarrassed. When a person becomes self-conscious about debt troubles, they usually procrastinate. Face the problem and deal with it as quickly as possible. Your stress levels, along with your debt load, will be greatly reduced. Once you’ve reduced your debt you’ll be amazed at how relieved you feel, and how much more productive you’ll be. Every client we’ve dealt with has been happy once we’ve helped them resolve their debts. It may be hard to do, but don’t let embarrassment stop you from debt freedom.
  • Get professional advice – it will save you time and money. This sounds easier than it is, for several reasons. We all have friends or family we rely on for advice. Those people always do their best to help, but sometimes they may not have the knowledge base to give you the best advice. Here is an example:
  • We had a client that had equity in their home, but weren’t willing to upwardly refinance their mortgage. They had over $70,000 in credit card debt and ran into problems when the family suffered a job loss. A close friend told them to transfer the title of their home to another family member to protect the home from creditors. That one bit of bad advice almost had our client being charged with fraud. We were able to correct the mistake and help them settle their debt for less than 50% of the principle. The moral of the story – always get professional advice!
  • Don’t put off dealing with your debt. Like we said earlier, putting off dealing with debt is one of the most common things we see. It’s also one of the most damaging things a person can do. Interest can cause a $20,000 debt to balloon to $30,000 a lot faster than you may realize.

Ways to Beat Your Debt

Review Your Financial Situation

The first step to beating your debt is to review your current financial situation. You will need to set aside some time where you can review all of your financial ingoings and outgoings along with all the money that you owe to lenders. You can use Internet banking to be able to easily view your statements and get clear picture of your circumstances. You can also review bills and other direct debits which are going out from your account. Always be honest with yourself and write everything down. It is beneficial to create a spreadsheet which contains all of the information on your present financial situation. This step alone will help you to feel clearer on your finances, and you can start to use the information it presents to create a get out of debt plan.

Cut Down on Your Spending

This step is essential if you want to beat your debt. Start looking for ways that you can save money on your current spending. Even the smallest changes can add up to big savings in the long run. Take a packed lunch or home brewed coffee to work instead of buying it out everyday. Be thrifty with your food shopping, and cut down on spending on personal luxury items that are not necessities. These will only add to your debt, and although the thrill of purchasing it may make you temporarily happy, in the long run it is only going to become an additional burden.

Get Expert Help

It is essential that you seek expert advice on your current debt situation. Professionals in the field will be able to provide you with detailed and comprehensive information on how you can best deal with your debt problem. They will be able to take a look at your current income and expenditure and provide you with some simple solutions, and explain what the advantages and disadvantages are for each solution. All financial help is completely confidential, and there will be no pressure or obligation to commit to a specific service.

Debts Affect Retirement

It is important to clear a big part of your debt before you retire. Retirement usually means that you will not have the same income and financial means as you’ll give up on your daily job.

When it comes to debt, credit card loans are notorious for their high interest rates. An average American has a credit card debt of about 3,000$ a year only in interest costs. The minimum payment which you’ll have to make every month comes to 250$. If you have a steady job that pays well, these costs can be easily covered. However, on a pension of 1000$ it becomes a serious financial difficulty.

Many Americans had to take a mortgage loan to afford a house or an apartment. Mortgage loans make a big part of the total debt every household has. Paying your mortgage loan before retirement must be a priority!

Student loans are taken in the hopes that a college degree will help you find a high quality job that pays well. Many see it as an investment. Investing in education is a good idea, but you still have to pay back your debt. Take care of student loans as soon as you have the financial means to do it!

Debt always comes with stress. Retiring should be a time of peace and relaxation. Unpaid loans put a lot of emotional pressure on you and stress leads to many medical issues like heart diseases.

How can you cover all your loans before you retire? Before borrowing money think of the consequences that such an action will have on your financial life. Always save for retirement and try to take as many loans as possible! It is a good idea to have first a solid retirement fund and then pay for your children’s college education.

Reasons to Live Debt Free

Freedom to Choose

When you are debt free, the money that you make is your own. Okay, so the taxman wants his share, but all things being equal, you can spend your money how you choose.

What you are not doing is paying interest to corporations which frankly would not notice if you did or not. Don’t get me wrong, businesses need to make money, but I choose to let them use somebody else’s money and hard work, not mine.

What I choose to do with my money is not to work a nine to five job, spend quality time with my wife and dogs and enjoy a full social life with my friends and neighbours.

How would your spending change if a large chunk of your income was freed from servicing your debt?

Would you choose to live any differently if you were debt free?

Earn Interest Instead of Paying It

I find that when I talk to people about finance, the often lose interest, look bored and try to change the subject. However, there is a reason it is called “interest”, because once you understand a little about how money and numbers work, I defy anybody not to become very interested indeed.

Here are some facts about compound interest –

If you have a 25 year mortgage at 5% and double the repayments every month you will repay the mortgage over 16 years earlier, saving over $50,000 in interest on a $100,000 loan.

Then invest your monthly mortgage payment (which in this case is $590) in a savings plan paying 2.5% interest for the remaining 16 years. At the end you will have savings of over $139,000. Of that over $20,000 is interest earned, money working for you instead of the other way around!

When you are debt free your money can work for YOU while you sleep – soundly – not for the corporations. I call it a “get rich slow” scheme.

Save for Retirement

Many people spend their whole working lives working to save for retirement and pay their debts before they finish work. Then they finally retire and find that they have all the time in the world, but less spare money than when they were working!

If you consider the examples I showed above and took out your mortgage at, say 25 years old, by the time you are 50 you will have leveraged your initial mortgage $100,000 mortgage debt into $139,000 savings, AND you own your house.

Or, to put it another way, the $590 per month you saved for 16 years can then be withdrawn from your savings every month for almost 20 years!

If you free yourself from debt at a young enough age and use those payments to save for your retirement you can either retire earlier, or have a much higher income if you continue working.

What would you do, retire early or work longer and take higher retirement income?

Business Debt

It is not recommended to handle debt negotiations on your own. Debt is menacing and getting the support of your family and friends helps relieving that stress of debt. In fact, the best way to negotiate debt is to hire consultants who can communicate and manage lenders to arrive at a helpful debt settlement.

The handling of debt at its initial stage makes it easier to settle. Lenders should not be ignored, as that would worsen the situation. Do not keep postponing to explain your present financial position to creditors.

Since it is in the interest of all concerned to get a solution, the lenders would do well to cooperate with the businesses to reduce the rates of interest, extend the line of credit and streamline the debt situation. Dealing with a number of creditors drives your focus away from your business. Debt consultants of good reputation are competent to negotiate with creditors and resolve debts for amounts smaller than what is actually owed.

Creditors are scared that they might lose the loaned amount for good. Moreover, they are keen not to show debts in their books of account, and they would be willing to negotiate the debts. They are aware that they have a chance to get back a part or all of their loaned amounts.

The borrowers should be ready to pay some money at the start of the negotiations, as the lenders would like some reasonable percentage of loans to be paid upfront. Otherwise, they may even refuse to negotiate. It is at this point that a competent and experienced negotiator can help the business by negotiating for a smaller upfront amount.

When creditors are paid through a bank account or a credit card, they get informed of the debtor’s banking status. In case the owner is sued in the meanwhile, the creditor, by getting this information, can access the owner’s funds. To avoid that eventuality, it is best to pay the debts through money orders, thus keeping sensible information secured.

Creditors would be willing to accept a lower amount, as they are assured of getting back s part of their funds. Most often, business owners can expect to pay an amount lower that what is owed. However, they should insist that the debt should be reflected as totally paid in the account books. The language used for this purpose is ‘fully paid’ or “debt satisfied”, as no business owner would like the word “debt” to appear in their books.

Owners should never agree to pay an amount that they can’t afford. They should inform the creditors of what they can pay, and see what the demands of the creditors are. The lenders very well understand that, once the business is declared bankrupt, they won’t get any payment whatsoever.

Commercial Debt Collection Agencies

If they ever take any legal action and become successful at it, they will execute judgment without any hesitation and, in a number of cases, they may seize the property of the debtor. Still, there are extreme situations where they may even liquidate the debtor’s assets. Agencies that take care of debts between companies are able to handle all sorts of issues that surface during the process of delivering their services. They offer a wide range of services, such as getting the payment on checks that have insufficient funds, second placements; skip tracing or other issues pertaining to particular individuals and situations.

A majority of debt collection agencies provide features that cater to specific industries, together with the services they offer. Credit application assistance is on top of the list. This valuable service is offered by most agencies. This program allows agencies to shortlist applicants and to get rid of fraudulent ones before their debts build up. To achieve this goal, applicants should go through a number of screenings, which are based on their credit report. There are also some things they need to watch out for, and these include fake phone numbers, fake addresses, plus other details that indicate increased risks.

Agencies that collect commercial debt examine the company’s business profile thoroughly and this usually includes the previous credit history. To make sure that unforeseen predicaments are eliminated as early as possible, these agencies link the credit history of both business owner and his/her company.

An additional feature that best defines these agencies is their skill in going after clients that are delinquent. These agencies are experts in this field, since they are managed by professionals that make use of the latest technologies, in order to achieve positive results. They use a strategy called skip tracing, which allows them to trail the activities of individuals by means of data banks and locator programs. Debt agencies mainly hire trained professionals that can collect the money that you ought to have received. Leaving this job to the experts helps you save time and effort.