Debt management, the earlier the better
Thursday, December 23rd, 2010Debt management, the earlier the better
An experienced debt adviser will tell you that when it comes to debt problems, the sooner they are addressed, the better.
There are a range of debt solutions available, all of which can take time. But the sooner you start addressing a problem, the less your debt can grow, and the better your chance of getting out of debt more quickly.
Why is repaying debts on time so important?
When you borrow money, you commit to repaying what you borrowed, plus interest. When you miss payments, this interest continues to grow – meaning that for each payment you miss, the overall amount you have left to repay will increase. If you miss several payments, this can cause the debt to ‘snowball’ – and then the problem can become even more serious.
Repaying your debts on time will act as a positive mark on your credit history, which can make obtaining credit in the future a lot easier. Likewise, failing to make payments will go down as a negative mark on your credit history, and could make obtaining credit more difficult.
And of course, repeatedly failing to make payments could result in a default on your account, which could lead to legal action from your lenders, and could seriously affect your longer-term ability to obtain credit.
What if I simply can’t afford my debt repayments?
If you have tried everything to get your finances in order and find you still can’t afford your debt repayments – particularly if your commitments exceed your income – then a debt management plan could help. A debt adviser can help you to establish whether a debt management plan is right for your circumstances, or whether another debt solution would be more appropriate.
A debt management plan is an informal arrangement between you and your creditors in which you will agree to make lower monthly payments towards your debts, in line with how much you can afford.
It is possible to negotiate with creditors on your own, but this can take a long time, and is often a stressful process. For that reason, many people decide to use a professional debt management company, which can carry out negotiations on their behalf.
As well as reducing your monthly outgoings in order to make your debt repayments more affordable, it is often possible to reduce or freeze interest and other charges. This can prevent your debt from growing any bigger and, in some cases, can reduce the overall amount you will be expected to pay.
However, repaying any debt more slowly will mean it takes longer to pay off, and can cost you more (due to interest) in the long run.
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