Whenever you have a loan, there might appear some problems if you don’t pay your rate in time. This is something that happens every time you miss paying your loan, and it is not different, no matter what financial institution you have chosen to take your money from.
As everyone wants to have more things or more money, but loans are still here to make your life apparently easier, then you will surely need someone specialized in debt management to help you out.
What Is Debt Management
Debt management is that process when you need specialized help from a financial advisor to make sure you can cover all your loans. This is required whenever you don’t have control over your finances – it’s not something that is mandatory, but it’s better to have an alternative to your consumer debts. For example, if you have not paid for your mortgage for a few months, the bank can come and evacuate you. However, with a debt management plan, you might be able to keep your house and also pay your debts.
Debt Management Plan
A debt management plan is actually an agreement between the creditor and the debtor. You are the debtor – as you are the one who is in debt, while the creditor is the financial institution or the bank who has offered you the loan. This is about reaching a formal agreement between the two of you, to help you reduce the value of the debt that you have for a certain period of time, until you regain the control over your finances.
A DMP – also known as a debt management plan will actually help you pay lower rates for the loan that you have. The usual process is that if – for example – you earn less money than the monthly rate, a DMP will calculate what you usually need for your monthly expenses, while the rest of the money will automatically be directed for paying the debt that you have.
Gather all Debts
A DMP will also be able to gather all your debts into a single one. Usually, a DMP is offered by a firm, who is specialized in these kinds of solutions. This means that the firm will offer you the possibility to make a single payment to cover all your rates. However, this is up to them and their contracts with the financial companies that have set up your loans. Not everyone might agree to this kind of arrangement, but you will know it from the start.
If you choose to make a DMP, make sure you also have a signed contract with that company. This is because they will be able to pay your monthly rates on your behalf only if they have a written contract. Don’t assume that just because you have reached a verbal agreement with them, they will also pay your debts for you. Get the written contract and start paying your monthly rates.
The DMP company will gather all your rate loans into a single one. As they have contracts with different financial institutions, they will be able to do this for you, especially because you can’t afford to pay what you owe at that time. With the written contract that you have, they will gather everything so that you will make just one payment into their own account. Once this is done, they will make sure that each of your creditors is paid each month, even if the sum is less than what you initially had to pay.
Don’t worry if this seems complicated – simply talk to a financial advisor or a debt management company and you will get answers for all your questions.