Debt is defined as something owed by one person or party whom he or she is obligated to pay given certain terms. Debt can be secured or unsecured, which primarily is based whether it has collateral or none. Most people eventually find themselves in great debt and don’t know what to do. In various countries, a plan was already devised to help people address their debt. This is known as the debt management plan.
Debt management plan is a method used to be able to track down all your debts, assess your monthly or annual income, your budget, and also negotiating with the interest rates with the creditors. The negotiation would usually work as long as the lenders will get to earn more but it will be adjusted in such a manner that the debtor will be able to attain the monthly payment terms.
Unsecured debts are the only debts addressed by the debt management plan. These debts include credit cards, personal loans, store cards and bank overdrafts. Secured loans such as rent, utilities, mortgages and rent payment are not subject to this plan. There are fee-charging DMP companies and there are also free creditor sponsored DMP organizations which you can seek help from.
If you don’t want to end up seeking help from DMP organizations, it is still best to stay away from debt as much as possible. This could be done by proper budgeting of your funds. Priority must be given to the expenses which are necessary for living. These are your house rental fees, electric bills and water bills. Budget for food and education must also be prioritized. Shopping for things such as new clothes, gadgets or appliances which are not a necessity as of the moment must be avoided.
Living without debt will greatly benefit you. You would not need to worry about monthly payments and interests. Instead of piling up your interests because of loans or credit cards, you can instead save your extra money to be able to buy the things you want in the future. This way, you can control your expenses while living within your means.
If you have current debts, you must now make a list of all of them. Then, you must prioritize your repayment. List all your debts from the one that has the largest interest to the one with smallest interest. Then you have to choose which debt you will prioritize to pay first. You can either pay off all those small amounts first then attack the large ones. Or you can first pay off the ones with higher interest rates, then pay the smaller ones after.