To be sure, the phrase- "Debt Management" has been in use for some time now and there is a fast growing area of complaint involving the so-called "Credit Management" or "Debt Management" industry. But what is debt management anyway? And why do people consider it as either potentially lucrative or downright hazardous path to follow?
The term debt management is actually an umbrella for a large group of debt-environment functions and activities. Debt management involves one or all of the following: debt reduction, consolidation, negotiation, settlement, bankruptcy, credit repair clinics, and even deciphering credit reports.
To have some inkling as to what debt management really is, let's first define these few terms.
Credit Repair Clinics- These are services offered by institutions that are said to help you fix your credit.They say that a lot of these clinics are illegal. Some of their actions include stealing the credit files of folks under the age of 18 or the credit files of those who have died or live in far away places. Some have also been said to break into credit bureaus and change files. Still, others suggest you to start a new IRS Employer Identification Number (EIN) which is illegal and prevents you from earning Social Security benefits. But the bottom line of these so-called debt management operations is that they can't do anything that you can't do for yourself.
Deciphering Credit Reports- It can be a bit intimidating trying to study credit reports. However, if you take it slowly, you can get through it. Debt management involves some bit of understanding of credit and credit reports. If you want to correct your credit, then you need to understand it first.
Debt Reduction- Debt reduction is just that reducing your debt. This is perhaps the most logical way to manage your debt. Reduce your debt so you'll have little trouble with it.
Debt Settlement and Negotiating with Creditors Yourself- There's no doubt that debt management can be a daunting task. Although settling debts might be best relegated to professionals, there is still nothing like self-involvement.
A debt management program can help you turn your loans, credit cards and overdrafts in to a payment that you can afford. If you can turn your debts in to a single monthly premium, you may be able to afford the payment. Your payments may become much easier to manage with good debt management.
Debt can get you stressed out. You can start by confiding in someone you trust. If you think you want to get in touch with a debt management organization please do. The best way, however, for debt management is to set up a budget. This way you can have a set plan for exactly where you want your money to go. Be honest with yourself while you make your budget and your spending habits. It will be easier for you.
Once you have a budget plan a strategy for debt management. Make a list of the debts that you have and start paying them one by one. You may begin with the highest rate and move to the lowest. Paying off your debt should be your first priority. So, if you have any bonus, winnings from a lottery or any extra income, use them to pay off your debt. You could also work overtime to earn some extra cash or even get a second job if you can.
If you have to buy stuff, use only cash instead of card so that no more debt piles up on your account. Always pay your debts on time. Make them the first priority. If possible send payment at least 2-3 days before it is due. If you think you cannot make a timely payment in some month, get in touch with your creditor and let him know. Say you cannot make a full payment in a certain month.
Debt Management vs. Bankruptcy
The differences in impact between debt management and bankruptcy are debatable. Deciding which course of action is best for you can be very tricky. This is because there are so many factors involved and these are often dictated by external circumstances. In theory, we all know bankruptcy to be a method used by people when they are absolutely unable to repay their debts. However, we known that this is not always the case in reality. The idea therefore is to find out if it is a temporary or permanent problem. Then and only then can start deciding which is best: debt management or bankruptcy.
Debt management is really an art and anyone who can master this has done an appreciable job. It requires the will to repay the loan and you will find various ways to do so. Take help from your creditor if you face any problem in payment. This is his interest too and he will be glad to help you with different options.