Business and Financial Consulting

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Before delving on what a debt management plan can do for you as an individual or as a business, it will be good to decide its scope. It is a misconception among many people that debt management plans can only be used for eliminating the existing mound of debts. Nevertheless, debt management plans have an extended scope. As the name suggests, debt management plans may be used with advantage to manage the debts to a particular level. It must be acknowledged that a proper management of debts makes debt consolidation and other methods employed to fight the menace of debts superfluous. Prevention is better than cure. Most of us repeat the adage incessantly. It will be through debt management plans that one can really develop the habits in ones life and dealings.

However, the role played by debt management plans in working with the debts already incurred may not be discounted. Many people owe their financial survival to the debt consolidation loans that helped them counter bankruptcy and other debt related problems.

The author has tried to illustrate the preventive as well as defensive uses of
Debt management plans through this article. Since the defensive part of the debt management plan is more widely used, we will first discuss the various plans to deal with debts that an individual or business has already incurred. The various debt management plans that come in this category are as follows:

o Debt consolidation loans

The most conventional method of dealing with debts is debt consolidation loans. Debt consolidation loan is essentially meant to arrange easy finance for clearing the mound of debts. A single loan is drawn after consolidating the various debts. One aspect that distinguishes debt consolidation loan from other loans is that the borrower gets help and guidance from the debt consolidation loan provider in the settlement of debts. Expert negotiation skills and a proficiency in debt settlement recommend the services of the debt consolidation loan provider in this regard.

o Debt consolidation mortgage

Debt consolidation mortgage constitutes a major part of the debt management plans. A debt consolidation mortgage is basically a second mortgage. In this method, the borrower requests the mortgagee who holds the first mortgage to the home to repay his debts. In exchange, the borrower includes the debts while making the monthly repayments. The advantage of the debt management plan is that finance is available for debt consolidation at rates equivalent to a mortgage, i.e. at cheap rate of interest.

o Debt consolidation through remortgage

While debt consolidation mortgage entails dealing with the same mortgage lender, debt consolidation through remortgage involves shifting to a mortgage lender who offers a better rate of interest. In this debt management plan, the borrower or the mortgagor requests the new mortgage lender to include several debts along with the unpaid amount on the original mortgage for disbursement. Again, this will help the borrower get cheaper finance for debt consolidation at the rates of a mortgage.

o Debt consolidation through credit cards

Credit card as a debt management plan will be especially useful when the debtor wants a quicker settlement of debts. As in loans and mortgages, a credit card user need not wait for the debt management plan to be approved and sanctioned. Another advantage of credit cards as a debt management plan is that borrower is not required to pledge any of his/ her assets to back the loan. This can however be too expensive for the credit card user.

o Debt consolidation through home equity loans

Home equity loan is a secured loan taken against the equity in ones home. Home equity loans put a convenient method of debt settlement. A home equity loan is a multi-purpose loan that can be used with equal advantage whether in a debt management plan or for making home improvements. Since home equity loan is secured, it provides cheaper finance. However, the borrower needs to be regular in making repayments to protect his house from repossession.

o Debt consolidation through debt settlement

This form of debt management plan involves associating with a debt settlement company. The debt settlement company undertakes to repay the debts while the debtor repays the amount through small monthly instalments to the debt settlement company.

As discussed above, the preventive methods are equally important tactics employed to avert the occurrence of debts. Debt counselling aims to impart debt management training to individuals as well as businesses. People are taught the manner in which to manage their revenues. Many of the tips provided as a part of the debt counselling techniques are time worn. The aim of debt counselling is not to recall these techniques, but to help people through innovative ways and means to employ these techniques in their life.

One financial mistake and you are down in dumps. It is under no circumstances a very choicest place to be. But only when you hit the rock bottom you realize that there is no way, except the way up. “Way up” not only sounds good, it is good. In the financial sense the ‘dumps’ is bad credit and the ‘way up’ is bad credit loans.

Bad credit is related to difficulty in finding loans. The loan market has expanded considerably within the last few years. So has the market for bad credit loans. The implications for the consumer – consumer has the benefit of getting better opportunities for bad credit loans. There is nothing derogatory with the term bad credit when applying for loans. In fact the loan process for bad credit loan is similar to any other loan barring the fact that they are loans for bad credit. While applying for bad credit loan, you need to have a regular income, pay your bills on time and not have a severe debt condition.

Many people do not know what bad credit means. You can practically have bad credit for a simple reason as not keeping on one address for a long time, or not returning a book you borrowed from library, an unpaid parking ticket. It is not restricted to making errors in repayment of loans. Rendezvous with bad credit has become fairly easy these days. There is something called a credit score which sensibly includes all the credit information available about your credit conduct. Credit score exposes all the credit information which gives an idea about the risk involved with a specific person, when he applies for a loan. A FICO score is the best way to know whether your credit is good or bad. Most lenders take the reference of a fico credit score while deciding whether to extend loan to you or not.

The fico credit score ranges from 300-850. Below 600 the credit score is termed bad. If you happen to find out that your credit score is bad then don’t panic. Make a bad credit loan application and be open with your lender about bad credit. Your honesty will favour your Bad credit loans claim. While approving a bad credit loan application, the loan lender is not always paying attention on the credit score. Though it is a very significant criterion. There are other criteria which have as much influence for getting a bad credit loan approved. Equity, job history, income, savings, and the loan type – all will have a say. Also the success of bad credit loan approval depends on your recent credit history. A positive recent credit history will boost your credit application even if you have had credit problems in the past.

Bad credit loan are offered both as secured and unsecured loans. Sometimes Secured and unsecured loans are an added perplexity for bad credit loan borrowers. Secured loan for bad credit will have security as prerequisite for its authorization. Contrasting to them are unsecured loans which require no such obligation. Here higher interest rates act as substitute for collateral. However, with unsecured loans for bad credit act you don’t have to worry about repossession.

Conceive bad credit loan as an opportunity for improving your credit. Resort to window shopping before finalizing on a bad credit loan. I mean just look around – for rates, ask for quotes. Quotes are not necessarily accurate but they help in giving a general idea about the loan cost. Find the loan that speaks to your situation. Try taking small amounts for bad credit loan. Make sure your repayments are on time. By doing so you are steadily improving credit. Take the amount that you need, even if you can afford more. Showing commitment with bad credit loan will display a dedication to improve credit. And gradually, you will see that you are qualifying for regular loan instead of bad credit loan.

You’ve analyzed your past expenses, put them into spreadsheets, loaded Quicken with all of your data and come up with a budget. Now what? The tough part! You actually have to stick to your budget and put your plans into action. This is easier said than done. In many cases you will have forgotten about your budget and your financial goals 6 months or a year down the road. How do you keep this from happening to you?

Here’s how. Make sure you follow some of these tips below so this doesn’t happen to you.

1. Create a budget with realistic targets - Let’s say one of your budget goals is to not eat out for lunch or dinner on a regular basis. If you are honest with yourself you may find this to be an unrealistic goal. Sometimes it’s a nice break to eat out and have a relaxing rewarding evening. In other words, don’t set the bar too high. Drastic and unrealistic goals are one of the surefire ways your budget will not succeed.

2. Budget for expenses that don’t occur on a routine basis - Make sure you give consideration to expenses that occur once a year, such as holiday presents, birthdays, vacations, weddings, car maintenance costs, etc. These expenses don’t occur every month and they will bust your budget plans wide open. Make a list of these events on a calendar and put a dollar figure to them. Place them in the month they are expected to occur so you can plan in advance how you will pay for them. The regular routine expenses are not the reason your budget will fail. It is these “gotchas” that will wreck havoc on your budget if you don’t plan for them.

3. Put your budget in writing - Take the time to write down your budget plans. Making a mental note of your budget goals is a recipe for failure. Don’t assume that your financial future will take care of itself by making a simple mental note to yourself. If you have your budget goals detailed in writing you can review and remind yourself weekly and monthly of your financial goals.

4. If you have a bad month or week, don’t give up! – Let’s say you have been reaching your budget goals for three months. In the fourth month, for whatever reason, you didn’t reach your budget goals. Maybe you even stopped trying to stick to your budget! If this happens, don’t just throw your hands up in the air and admit to failure. Everyone falls off the wagon sometimes. Your budget is a journey. There will be bumps in the road, so the key is to realize that everyone makes mistakes. This relates to a story I like about a great old time golfer named Walter Hagen. Before each round of golf, he told himself that he would have 4 or 5 bad shots. During the golf round, if he hit his ball into a bunker, he would tell himself, “There is one of my bad shots that I was expecting”, hit the ball out of the bunker and move on. It didn’t phase him one bit because he had knew there would be some bad shots in his round.

5. Adjust your budget over time - This one is a biggie! It can take months or even years to fine tune a personal budget. When you initially made your budget plans, you probably had to guess at some of your figures. They might not have been in touch with the realities of every day life. For example, you may have underestimated your monthly grocery or utility bills. If this happens, analyze all of the underlying money that was spend in this category to see if your initial estimate was unrealistic. If it was, try to come up with a more accurate number and then to stick to that new figure. It is this type of adjustment that is one of the keys to making sure you can stick to your budget.

6. Review your budget every month - This is where you will make any adjustments that are needed. Set aside the first day of each new month to review your income and expenditures and match them to your budget goals. By actively reviewing your finances and comparing it to your budget, you can adjust your spending habits. This gives you a chance to analyze areas that exceeded your budget expectations and make the adjustments in your spending habits or your budget. The goal here is to not forget about your budget. One tip that has worked for me is to put a printout of my basic budget goals on the refrigerator. That way every day, several times a day, I would notice my budget goals sheet. I may not read it every time, but I notice it and it reminds me that I need to stick to my budget. That is why tip number 3 is so important.

7. Set specific short-term goals - Let’s say one of your budget goals is to have all of your credit card bills paid off in two years. If your credit card balances total $20,000 that would be $10,000 a year. Divide that number further into quarterly reductions in your credit card bills, in this case $2,500 every 3 months. Now, this is a more tangible budget goal to shoot for isn’t it? I find that when I divide intermediate and long term goals into short-term tangible stepping stones, I am able to feel a greater sense of accomplishment and am more likely to succeed. This brings us to number seven…

8. Reward yourself - That’s right! Treat yourself when you reach your some of your short-term goals. Since your financial budget is really a journey, take some time to smell the roses on your way. Sticking to your budget should not be a restrictive, unpleasant experience. Not only should you take the time to enjoy your financial accomplishments along the way, but use part of your budget for fun things that you enjoy. Just make sure your rewards don’t end up breaking your budget!

9. Pay yourself first - I’m sure that one of your budget goals is to save and invest a portion of your income. One of the keys to make sure you succeed at this is to do what the IRS does with your paycheck, take it out of your discretionary income immediately. This way, the money is saved away right off the bat. Move the money immediately into a savings or mutual fund account. Many mutual fund companies can setup automatic deductions from your paycheck. Despite your best intentions to save, the hectic, daily demands of life can reduce the amount you are able to save.

10. Attitude is everything - When most people think of a budget, they picture restrictions and pain. Almost like a diet. You know what happens with most diets? They don’t seem work for long! First, if your budget is too strict, too restrictive on your spending, it won’t work either. However, you will need to limit your spending in some areas and this will take some adjustment in your attitude. I found that when I am feeling limited and sorry for myself when I can’t purchase something that I want, I remember my financial goals I set with my budget. I think about the satisfaction I feel when I reach those goals. Over time, you find that you don’t want to disappoint yourself by breaking your spending goals on a spur of the moment purchase. Now, I actually get more pleasure knowing that I am reaching my budget goals when the thought of an impulse purchase crosses my mind.