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Debt management is a strategy or plan devised by a third party to help an individual repay their debts to a creditor or creditors. The third party involved in this process is usually an organisation with specialised knowledge in the field of managing debt and the troubled individual seeks them out because, in most cases, the debts that they owe are so high that the individual is unable to successfully cope with it themselves.
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They may also have no real understanding of the options available to them in a situation where they may find themselves struggling badly with debt.
A debt management plan involves the third party looking at the outstanding debts and taking into consideration the debtors’ income and budget. They then consult with lenders about changing the interest rates and payment terms for the debts. These negotiated rates are based on the debtors’ ability to pay, albeit over a longer period of time, thus the creditors’ collection in full being more likely.
Debt management can be necessary in many ways; those in trouble may have accrued the debt for a variety of reasons such as excessive spending on credit cards, a lack of income due to being made redundant, reduced income due to an economic downturn, or even on grounds of illness.
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