The debt management is a method of controlling such unsecured out of control debts. Many times the debtors are unable to control all debt like mortgage loans, credit cards, bank overdrafts, rent and personal loans due to some reason like poor income, late payments, and high interest rate.
The debt management program is a service of third party companies that negotiate to the lenders, re-negotiate interest rate and planning the payment schedule of the all debt on behalf of the debtor.
How Does Debt Management Help?
According to the terms of a Debt Management Company the debtor will fully detach from the creditor and the company as third party talk to the creditors and lenders. This service is available mostly with private and government organizations at free of cost or at low cost in USA, Canada and UK. Most companies will review each debt plan very carefully and compare how much you will pay and make the most economic and realistic way of monthly payments.
The debt management companies are not only to control debt and also to improve credit score of the debtor. They are assuring you the best possible saving on your monthly payments. These companies help you to improve credit score by continuous communication with creditors that they may not make you defaulter and hurt your credit score.
Nowadays it is also free online service where many advisers are standing by and awaiting for you to apply for good suggestion for you all debt.
Some companies advise to get a debt consolidation loan for quick solution but more debt is not solution for controlling debt. So you must need to careful about the bad debt management companies.
You may take more suggestion and compare them yourself and go for the best one. Before choosing the debt management companies you must find the history of service and way of ramification to the debtors what they use.
IVA Vs Debt Management
When looking to resolve debt problems, there are a number of options available in order to help restore a good financial standing. Two of these options include an IVA (Individual Voluntary Arrangement) and a ‘Debt Management Plan’. There are various differences between them both and each individual should deter what both entail before making a decision on which is best for them. Below we take a look at the main differences between an IVA and Debt Management Plan.
Firstly, there are many people currently on a debt management plan that would be more financially secure if on and IVA. However not every person in debt may qualify for an IVA.
For an IVA the debtor needs to be at least £15,000 in debt to a minimum of three creditors, whereas for debt management a person needs to have £2,000 of unsecured debt with at least two creditors.
When the repayments are over the term of the agreement a debt management plan will mean the debtor pays all monies owed in full. With an IVA only a portion of the total debt is paid (up to 75%) depending on each person’s circumstances.
Typical repayments for both do vary, however a rough guideline would be that for a debt management plan, monthly repayments will be about £100 compared to £200 per month with an IVA arrangement.
Another major difference between these two debt management options is the fact that an IVA is a formal and legally binding agreement whereas a debt management program is not. Furthermore, a person’s assets do not factor into debt management, but with an IVA they do.
For example, if a person’s debt was £75,000 but the equity in their property is £200,000 then an IVA would not be accepted. With debt management the person does not need to be insolvent to be accepted, in other words their assets can be worth more than the individuals debts.