Debt management 101

As it is with a great many things, there is a lot of fuzziness surrounding a concept such as debt management. Does debt management merely concern itself with mitigating your debts or does it have a lot to do with actually paying it all off in good time? Or maybe it has something to do with both? Let’s try and bring some clarity to the situation. Debt is nothing more than an agreement between the MRA and your creditors aimed at reducing your debt levels over a pre-set period of time. Debt management, if properly executed, will help you work off your debts and get a clean state with which to plan your finances again.

So you ask yourself the inevitable question then; can debt management help you? The frank answer to that is that it might be, but it has a lot to do with your particular situation and there is no one size fits all solution. But one thing that can be said very safely is that if you are struggling to meet all of your payment obligations, but can meet some of them, then debt management might be for you. The one thing to keep in mind though is that a debt management plan will adversely impact your credit rating, at least in the short term and maybe even in the medium term. It’s not meant to be a “get out of jail free” card, and creditors and credit agencies certainly won’t see it that way.

Many creditors will be open to the idea of working with you and coming up with a plan that will reduce your interest rate and charges over a period of time, but be aware that drawing up a payment plan that is drawn out over a longer period of time will likely increase the amount you pay. Moreover, you cannot do this for a secured loan, so let’s get that idea out of the way. So, long story short, yes you may well be able to get out of debt by using a debt management companies services but your credit rating will be hit as a result of this, affecting your ability to get any loans.

Perhaps that is a good thing though since it will impart to you a crucial lesson of financial prudence. You know what they say about allowing a child to burn his fingers so that he doesn’t play with fire again, and it is much the same with allowing someone’s financial situation to be addressed by debt management services. Debt management is a double edged sword, and while it is always an option, it should not be your first option for meeting your financial obligations.

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