As the collective nation approaches $800 billion in personal credit card debt with another $1.3 trillion in student loan debt, an increasing number of Americans are having difficulty making ends meet. In recent years, as many as 900,000 people are being forced to seek bankruptcy protection on an annual basis in order to reestablish a normal lifestyle. Of course, they also have to live under the black cloud of bad credit because of their past sins.
Debt Management as a Possible Debt Solution
While debt settlement and bankruptcy represent the only possible debt solutions under the worst of circumstances, there are other viable solutions for those individuals who are still able to make their debt payments and maintain a reasonable credit score. Long before debt has to become a major obstacle in one’s life, a debt management solution could be used to keep things from progressing down the wrong path. In fact, debt management is something that could prove useful to anyone who gets a little leery of their debt situation.
What is Debt Management
Debt management is the process by which people are afforded the ability to manage their finances without getting themselves into further financial trouble. Debt management plans are especially effective at helping people control “unsecured debt” levels without the need to risk their credit worthiness or financial stability. Prior to taking more extreme measures, debt management is the first step one should consider as a responsible adult.
4 Major Benefits of Debt Management
Anything worth doing is worth doing for possible positive outcomes. With that said, a good debt management plan will usually render these four major benefits.
1. Reduction in the Number of Monthly Payments – Progressing debt problems usually involve multiple credit cards and/or unsecured personal loans. With a debt consolidation loan, most, if not all, unsecured debt can be rolled into one loan, which translates to less paperwork and a fewer number of monthly payments.
2. Lower Aggregate Interest Rate – Given the probability that troubled borrowers are usually caught with high interest rates on their credit cards, a good debt management plan will typically allow them to lower their aggregate interest rate across all of their unsecured debt. The only stipulation would be the presence of a decent credit score.
3. Lower Monthly Cash Outlay – With fewer debt payments and a lower aggregate interest rate, it makes perfect sense that the amount of one’s monthly debt payment would drop significantly. That extra money can be used to pay other bills or accelerate the repayment of unsecured debt.
4. Salvage the Credit Score – As a debt management plan allows the borrower to better maintain their payment schedule, it helps to eliminate the probability of missed or late payments, which translates to effectively protecting one’s credit score.