Debt Management

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Debt management may not seem like it's the most interesting or exciting topic, but for many, especially those who are deep in debt, it can be vital. Being responsible is the key to dealing with debt. If you aren't being conscious of your income and spending, working through your debt is going to be a lot more complicated. You should create a budget and make cutbacks where necessary. Having control of your finances in this way will go a long way toward helping you with debt management.

Debt Management Tips

  • Take care of high-interest debt first. Obviously, if you have a loan that has high interest, it's going to cost you more money in the long run than a loan with lower interest. You may be able to refinance to a lower interest rate if it's a home loan. Other debts can be consolidated as part of a refinance. Maybe you just need to make aggressive payments. However you do it, you just need to keep high-interest debt from piling up.
  • On the other hand, there are situations where you might want to let a debt be, in favor of making an investment. This is especially true if the debt is a mortgage. A mortgage is supposed to be a long-term commitment, and putting extra cash that you might have into it might not be a great idea. It's possible that you could take that money, invest it, and end up in a better financial position down the road. Owing money to someone is never a comfortable situation, but a mortgage isn't a normal debt anyway. It's more like a long-term investment plan.
  • Many people try to get more cash by compromising on their retirement plans. This should be avoided if at all possible. A retirement plan is an important investment; taking money from it to solve your immediate problems could have a seriously negative impact on your future. This certainly shouldn't be the first place you look to gain some extra money.

Debt Management, Debt Consolidation, and More

There's a lot you can do on your own to start eliminating your debt. If, however, you find the process too complicated, or you just want to make sure you're doing it in the best way possible, you don't have to look far for help.

There are companies out there whose specific purpose is to help you get a handle on your debt. They'll give you advice like that found above, but also more direct help. They can help you with:
  • Debt consolidation: It's possible to find a company that will pay off all of your creditors for you, giving you a new, single loan. Usually, this gives you better terms than you might have had. Plus, you won't have the headache of dealing with many different creditors. Debt consolidators will work with you to set up a payment plan you can live with.

  • Debt management: Debt management is a little different. You make one monthly payment to a debt management company. They, in turn, distribute the appropriate funds to your creditors, with whom they try to work out lower payments and interest rates. This can save you a significant amount of money, even though you'll be paying for the service.

  • Financial counseling: To get the best grasp of your finances possible, you might consider taking advantage of financial counseling. This can help put you in a good position to make a plan for your debt.
These are just a few of the options available; there's an endless supply of help out there. Just make sure you do your research before choosing a company to help you, so that you get the best possible deal.

Debt can be a major headache. In fact, it can completely alter your way of life. It's important to take control and do what's necessary to manage it properly. Hopefully, by following some of the advice outlined here, you'll be on your way to a debt-free life in no time.

Patrick Hanan  Posted by Patrick Hanan on June 15, 2010

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