Quick Silver Cash Cow

Anyone who knows something about debt probably knows something about debt management companies – professional firms who will manage an individual’s debts on their behalf.

This article takes a look at the pros and cons of debt management in terms of three topics close to any borrower’s heart: saving money, reducing stress levels and protecting credit rating.

Topic #1: Saving money

Pros: Monthly payments lowered. Interest frozen. Charges waived. The better their relationship with creditors, the better a debt management company’s chances of successfully negotiating for one or more of these concessions. This can save the client a considerable amount of money – not just every month, but potentially over the course of the debt management plan as well.

Cons: Lowering monthly payments means debts take longer to pay back. If interest hasn’t been frozen, they’ll also accumulate interest for longer, adding to the long-term cost. Plus, there’s no guarantee creditors will agree to any concessions, or that they’ll save the client more in the long run than the debt management company charges in fees. And since a debt management plan is an informal agreement, they’re free to change their minds.

Topic #2: Reducing stress levels

Pros: Some people don’t have the time to deal with complicated finances, or don’t feel confident about doing so. For them, it’s a huge relief to hand their debts over to someone else, who might handle everything from letters and phone calls to negotiations and payment distribution. And some people admit they’re no good at juggling numbers and negotiating deals, so it makes sense to let a professional talk to creditors and propose a repayment plan that leaves them enough money for essential bills and other expenses.

Cons: Not everyone feels like this. Many people would rather keep their finger on the pulse personally, so the thought of adding an intermediary just adds more complexity to an already-complicated matter. In short, they feel less stressed when they know they’re handling it themselves.

Topic #3: Protecting credit rating

Pros: By making new arrangements with creditors, a debt management company can minimize the impact of debt on someone’s credit rating, keeping debt problems from escalating into CCJs (County Court Judgments) or even bankruptcy. Plus, even though debt management addresses unsecured debts, it frees up money for secured debts such as mortgage payments, so people can avoid getting into arrears – or even being evicted.

Cons: When they agree to reduced payment terms, creditors may register a default (if they haven’t done so already) and this will appear on the borrower’s credit report, potentially making it harder and more expensive to get credit.

In conclusion… Debt management isn’t for everyone. Some people don’t like the idea of delegating their financial affairs like this. Others may not be eligible: creditors will negotiate like this when borrowers can’t afford their ‘normal’ payments, not when they’re simply looking for a way to reduce their monthly payments.

By: Melanie Taylor

About the Author:

Create a video blog

Huge billion dollar bailout plans in the works, a credit crisis, a looming credit card debt crisis, state budgetary issues and an imminent government policy of bailout and spend means a recession is looming. It is only a matter of time until the current credit and financial crisis leads to a full blown recession, below we will outline the steps to help recession proof your personal finances.

Inflation and Recession is Imminent. I am no longer on the fence on the matter, the economic statistics are beginning to roll in and earnings season on wall street has just begun. Consumer spending trends oft follow corporate spending trends and right now the strategy of the moment is defensive. With the inevitable recession and inflation in our near future, if not here now, here is the top 10 list of ways to survive the coming recession.

1. Downsize: There is no way around this one folks, I know we hate to hear it, but to recession proof your personal finances it is time to spend less and attempt to earn more.

2. Create an emergency fund: Do what you can to increase your liquidity. Set up an emergency savings fund of cash that can be drawn upon in tough times if you have not already done so.

3. Hedge your portfolio with Gold: Consider moving a portion of your assets into gold. Not gold stocks mind you, but actual gold as a hedge against inflationary government bailout policies.

4. Pay down your high interest debt: Take a lesson from the failing financial institutions and pay off your high burden high interest credit cards or personal loans, or at least stop adding to them immediately to recession proof your finances.

5. Balance transfer to ease interest burden: Consider a balance transfer on your outstanding credit card debt and take advantage of 0% for a period promotional offers to ease the interest burden and get ahead.

6. Get Emergency Credit Now: If you are lucky enough to have equity in your home or real assets, consider getting a line of credit against the asset now, and leave it untouched and available for hard times. Credit will be tougher to get with new future regulations and policy.

All is not lost, and there is much that is bright on the horizon. The US is a resilient nation, with a generous hardworking and industrious people. Preparedness is the name of the day to survive the coming recession. Spend the time to recession proof your personal finances now, your balance sheet will thank you for it.

By: Ariel Pryor

About the Author:

Create a video blog…instantly.