Debts have a way of piling up until they eventually become overwhelming. You lose all hope and are open to try anything that might work. That usually gets you into more debt. Debt management is often the only solution that allows you to avoid bankruptcy and regain financial independence. But how does an effective debt management plan actually deal with your debts? And what are the key components of a good debt management plan?
Agreement with Your Creditors
One of the key components of an effective debt management plan is a beneficial agreement with your creditors. This agreement is voluntary and is not legally binding for your creditors. Its effects last for as long as you are able to respect your “deal”. Also, it may happen that not all your creditors are included in this agreement.
Extended Payment Terms
Debt management entails methodical repayments of unsecured debts included in the plan. One of the key characteristics of this plan means that you are allowed to pay your debts throughout an extended period of time.
Reduced or Eliminated Interest
A smart debt management program usually means that your creditors agree to reducing or eliminating the interest and fees on your debt. It is one of the greatest benefits of debt management plans. Reduced costs lead to reduced monthly payments, which would allow you to pay it off sooner.
Debt Management Counselling
You may think that you can control your debts without any help. The truth is that it is often necessary to support your debt management plan with counselling. But the burden of overwhelming debts is usually so significant that people need guidance. It is also one of the reasons why payments are made through a credit counselling agency and redistributed to your creditors. A debt counsellor will also give you money management tips.
An Appropriate Budget
This is arguably the most important part of debt management. Creating a budget with your income and expenses can go a long way to getting you back on track. A counsellor will help you to develop a budget that helps you live within your means while you tackle your debt.
All of the measures involved in a debt management plan are focused on getting you back on track financially and reducing your debt load. In the end, it is all about creating a plan that works for you based on you and your situation. A good debt management plan is tailored to meet your specific needs. Contact Credit Counselling Services of Atlantic Canada for more information about our debt management plans.