Debt Management Programs ? Beware Before Choosing A Debt Relief Option

Written by admin on May 2nd, 2011

There are many different programs available on the market today for helping with debt relief. Debt counseling, debt management, remortgage deals, and many more. However, they all have one big problem attached, which makes getting out of debt a tricky task. Can you guess what this might be?

You may be thinking that it could be the fees, or the inflated interest rates, or maybe it could be the actual debt management companies themselves. Wrong. The main reason why people fail to get out of debt is the fixed monthly installments that come with all debt management programs.

Does your monthly income vary? The answer to this is most probably, absolutely yes. And this is very easy to understand as people’s careers vary and so do the amount of hours they work vary. For instance, if you are a shop owner, trade varies every day. The amount of money you earn is dependent on the amount of turnover generated every month. You may be a shop floor worker, and will probably find that the amount of hours you work is based upon the season of the year or special events etc. The global economy may have an impact on shopping habits, which may have a knock on effect leading to loss of jobs, or cut down in hours available.

Similarly to the amount of money you bring in, the amount that you spend is always different every month. You may think that this is not possible, but this is the reason why people get into debt. You may have a set budget for your month then you are hit with an unexpected expense. You may have been expecting some money from somewhere, but that doesn’t happen on time. You have already budgeted for everything that you are going to pay out and made the commitments. Oops.

One of the main causes for people getting into debt is unexpected expenses. When people have a fixed monthly income, they budget all of their expenses around this. An unexpected expense can upset their budgets, leading to debts.

Debt counseling programs seem like a good idea, but sometimes, they can lead to big problems. People often enter these programs with good intention, and are often happy to make the agreed payments on a monthly basis. They may be alright for a couple of months, then the boiler blows up. A new boiler costs around ,000. What happens to your budget when you are hit by an unexpected expense like this? That’s right. The budget is thrown straight out of the window. You are back to square one cause you cant keep up the payments of your program.

Other situations like, loss of employment, sickness, accidents at work etc can also play a big part in upsetting your monthly budget. These are just some of problems that can lead on to getting into more debt.

Ok. So we have established that debt counseling is not the best method for getting out of debt. It works only if you can guarantee that you will make all the payments on time. However life has no guarantees. So what should you do? You can look into debt settlement, or debt consolidation. These programs are a good alternative to bankruptcy, and if things are that bad, it is recommended that you check out these programs. It’s not for people who can pay their bills in full without hardship. But it can be a real blessing for those seeking relief from a crushing debt burden.

Debt settlement is good because you have control of the cash. You open a separate bank account, building up a saving each month, until you are in a position to negotiate a deal with one or more of your creditors. The beauty of this type of program is that it is flexible. For instance, as we mentioned above, people have unexpected expenses. So if you can’t put any money into this program one month, then don’t worry about it. Just make sure to pay something in the next month. Before you know it, you are in a strong position to negotiate a debt settlement deal with your creditors. Once you have done this, you can repeat the process to knock off another debt.

Debt settlement is not for everyone, however if used wisely, this type of program can easily reduce your monthly outgoings. The best part of debt settlement is the flexibility. So if you need to skip a payment once in a while, you will have no come backs or penalties. This makes all the difference as you can sleep at night without the hassle of wondering how you are going to make the next installment. If all debt management programs were based around this, then managing your debts would be so easy. Who knows what the future holds

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