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Debt management can be simply defined as a prearranged repayment arrangement which is being done by an appointed third party who is specialized in credit counseling. In most debt management plans, the third party in consideration focus only on unsecured debts. Home loans and car loans are not included in this type of management plan and it is an informal arrangement with the unsecured creditors in re-negotiating interest rates and extending the period of time for the debt to be repaid. However in a debt management plan you have authority to negotiate with the creditors by your self or obtain the service through a specialized debt management company.
If you are thinking of ‘do-it-myself’ technique the first method is to evaluate the current debt situation, the rate of interest rates and calculating the entire monthly debt payment. Then you need to calculate your monthly income and living cost and get a clear picture of the money you are left with to figure out the repaying capacity. Once the repaying options are examined you can make a plan and make the payments as agreed with the creditors. If you are unable to afford the amount of sum that needs to be repaid, you will have to choose a debt relief option.
If you are considering a third party to help you to wipe your debt away, you need to educate the debt management company with the actual information with regard to your actual income and expenditure. Once the assessments are done by the company it takes approximately one or two months to start a debt management plan forward as it may time for the creditors to reverse on your proposed repayment schedule.
Nevertheless, selecting a debt management plan will have an impact on the credit rating as you will be breaking the agreement of contract which you have with your creditor. However the credit score will be affected even if you do not choose a debt management company as you will be struggling on repaying the debts as the interest repayment will go high leaving you a very large amount to be paid at the end of the period. But displaying your responsible attitude in clearing the debt away will be favorably taken into consideration by future creditors.
The success of a debt management plan depends upon your control of spending and the commitment you contribute to pay away the debt.
