The number of people struggling with debt in the United States of America and all around the world is constantly rising. It seems like, despite all the available information, people are still finding it too difficult to deal with their multiple financial obligations. Of course, the state of the economy does not make things easier as the living costs are getting higher while the level of income stays relatively the same. And so, many people are having trouble even with paying for their regular monthly bills and basic necessities like food and clothes. This is why it does not really come as a surprise that many adults are experiencing major difficulty with multiple financial obligations. In such situations, the longer these debts remain unpaid, the more difficult it usually is for the person to get rid of them.
If a debt is such a global and well-known problem, why are people not better prepared for avoiding it?
Well, this is easily said than done. Even though many people are aware of the dangers that having multiple financial obligations represents, it is often too hard for them to avoid these troubles. There are many different types of financial obligations, and many different situations and reasons for which people end up carrying such debts.
How can people get rid of their multiple debts?
There are many different ways and approaches to the repayment process of such financial obligations. There are many different financial tools and methods that are available to people going through such financial troubles. However, choosing the right tools for the job is not always that easy. Since there are so many options that consumers can choose from, it can get a bit confusing and overwhelming. In addition to that, even if you are on the right track and have the best financial methods and tools for getting rid of multiple financial obligations, there is no real guarantee that these tools and methods would fit with the specifics of your financial situation. When you are looking for a way to pay off the money that you owe as quickly as possible, you need to know the details of the situation that you are in so that you would be able to find a solution best suited for your situation. You need to review the following:
- How many debts are you actually carrying
- What are the types of the financial obligation that you are carrying
- What are the terms of your bills
- What is the remaining debt amount on each of your financial obligations
After you are done reviewing all of your financial obligations, you need to focus on the other financial aspects of your situation:
- What is the amount of money that you need to pay for your regular monthly expenses
- What is your expected income, and what is the maximum amount of money you can use to repay what you owe
Choosing the right service
After you have a complete understanding of the specifics of your financial situation, it is time to choose the service that you are going to use to get rid of your multiple financial obligations. For many people, the right solution normally is to consolidate their multiple bills by using debt consolidation.
What is debt consolidation?
Debt consolidation is a financial method that allows you to combine multiple bills on different accounts into a single monthly bill. The service is designed especially for people who are struggling with more than a single debt and are looking for a way, not only to simplify the repayment process of their multiple financial obligations but also to improve their terms by lowering the interest rate and reducing their monthly payment. Debt consolidation offers all these and more.
What are the different types of debt consolidation?
There are different ways that you can consolidate your multiple loans. You should pick the one that fits best with your current situation. Here, we are going to focus on debt management programs.
What is a financial obligation management program?
Debt management plans or DMP as they are often referred to as are ways of consolidating multiple different financial obligations into a single monthly payment. Financial obligation management programs are basically an informal agreement that you make with all of your creditors for the repayment of your non-priority debts. Such debts include medical bills, credit card balances, store card, loans and others. To use a DMP, you normally have to work with a debt management organization. Most financial experts advise people to work with non-profit agencies. You submit a single payment to the non-profit financial obligations management organization that you are working with. After which the agency divides that payment between all your creditors. The job of a debt management agency is not only to split your single monthly payment among all your creditors but also to negotiate with all of them on your behalf to reach an agreement for better terms on your financial obligations. Normally, what your organization of choice is trying to achieve is to lower the interest rate for your payment, to reduce the monthly amount of that payment and in some cases, even reduce the overall amount of money that you have to repay your creditors.
How to determine whether a debt management program is a right move for you
Using a financial obligation management plan for dealing with your financial troubles may be a good idea if:
- You feel like you need some additional help in dealing with your creditors – someone who can negotiate better terms for your obligations on your behalf
- You are able to afford the monthly payment of your financial obligations such as rent, mortgage, and council tax, as well as your living costs, but you have trouble keeping up with other debts such as credit card balances and different loans.
- Having a single monthly bill instead of many will have a positive impact on your budget management
When you are making your choice, you need to be fully aware of the way that a debt management program is going to impact your financial situation. You need to understand that a DMP may:
- The service may extend your debt’s repayment period because of your reduced monthly payment. With that, you may actually end up paying a bigger amount of money than you would without using this service.
- There is no guarantee that your creditors are going to freeze the charges and interest on your financial obligations. This means that the actual amount of money that you owe may not go down as much as you would think that it would.
- Your financial obligations management company may charge you some fees. However, there are many agencies who operate with minimum fees.
- There is the possibility that your creditors may refuse to co-operate.
- Using this service will most likely show on your credit record, which may significantly lower your chances of getting financial assistance in the future.
If you are not sure that these terms are right for you, it may be for the best if you consider some alternatives.
Alternatives to DMP
If you feel like a debt management program is not the best option for you, you may want to consider some alternatives for consolidating multiple bills. Probably the best alternative for many borrowers is to use a debt consolidation loan. This type of consolidation is similar to DMP. However, with financial obligation consolidation loans, you are not only combining all your current loans into a single monthly bill, you are also shuffling them onto a brand new loan.