There are usually a number of financial management options that can be explored when people are in debt. Common financial management options include debt consolidation secured loans (DCSL) or debt management plans (DMP) etc. The best one really depends on your actual finance circumstances and also how much debts (or better called them uncontrollable arrears) you are really in.
Perhaps the best way to assess this problem is to be honest 100% with yourself. Get all your paperwork out and list your financial obligations one by one. At this stage, do not miss any item out just because you feel capable of handling that one with ease. The art of dealing with debts is to look at the whole picture and deal with it all in an open, honest, and a critical way in order to choose the best vehicle to manage or eventually get out of financial troubles.
Whatever financial management option you choose to get out of debts, you must be fully committed to it. For example, an IVA or voluntary agreement usually works around a five-year plan. Therefore, you must be committed to the related consolidation terms and conditions for five years to get out of financial troubles.
It should be aware that, on the other hand, a debt consolidation secured loan can be set up from five up to thirty years. The important factor with such kind of secured loan is to feel comfortable with monthly repayments and that you can commit to this payment without leaving yourself short. If you do leave yourself financially short, you will end up creeping back into financial troubles. It is because if you borrow bits here and there, you will then just go back to stage one (uncontrollable arrear). In such case, we believe that you should spread your loan repayments for as long as it takes, thus making sure the monthly repayment is honestly affordable and controllable. This way you can begin a fresh with your finances only concerning yourself with one monthly repayment and never letting yourself get into financial troubles again.
When taking out a debt consolidation secured loan you must really see this as a fresh start, a new beginning of your financial life so once the secured loan is complete, you should cut up all those credit cards. When other secured loan adverts and applications come through the door, you must rip them up. However, before we go into additional consolidation details, you should look carefully at all the available options you can consider to get yourself out of financial troubles to ensure that a right decision is made.
(i) Debt Consolidation Secured Loans (DCSL)
By definition, a Debt Consolidation Secured Loan (DCSL) is a way of merging all your financial obligations into one simple monthly payment. This monthly repayment is often a lot lower than you will be paying for all your financial obligations at that moment. Anyone would be happy with lower monthly repayments after consolidation. As mentioned earlier, you can spread your loan repayments over a longer period and often the borrowing interest rate is lower, often a lot lower! Do be aware though that if your secured loan stays over a longer period, you will be paying interests for longer duration and so the overall actual loan repayment could be larger in certain consolidation circumstances.
An IVA or voluntary agreement is known as a step before bankruptcy. It will affect your credit rating for some time and therefore we believe this method should be explored only if a secured loan or other debt management plans are financially unavailable. An IVA is an official debt repayment plan that, in most cases can reduce the interests you are paying for your secured loans, sometimes can even freeze your financial obligations. That said, IVA can sometimes reduce the total amount of debts that you owe after consolidation. An IVA may also give a certain level of legal protection from the companies that you owe money to.
(ii) Debt Management Plans (DMP)
By definition, Debt Management Plans (DMP) are an informal process of negotiating with your creditors. Again, these management plans can freeze or reduce the interests that you need to pay for. Your creditors may also offer extensions on your debt repayment terms or periods of time your financial obligation is spread over. As a result, these management plans can sometimes involve writing off some of the financial obligations you have.
It should be aware however that this type of management plans too can effect your credit history and thus your credit rating. Usually these plans also offer service providers hefty fees written in to your repayment terms. These fees, on some occasions, just increase the amount of money you owed dramatically. Be careful that these fees may also been hidden from customers who concentrate only on monthly repayment of debt management plans.
In all, you have to be away of any uncontrollable debt, by making use of either debt consolidation secured loans (DCSL) or debt management plans (DMP). However, always remember to read the related terms and conditions carefully or else you will go into another financial troubles again.