Debt Management guide
By Mansi gupta
Debt management as the name suggests is all about ways and means to manage your debts. Debt management has become very important these days when people are reeling under huge debts. This is mainly because of numerous people applying for loans or planning to get instant cash in some or the other way. As both personal and corporate debt levels are increasing each day, bankruptcy too is becoming a very common phenomenon.
However there are several ways to debt management.
• At first you must try not to spend too much of money over your usual balance.
• Secondly avoid the credit card usage as much as possible. If you are badly in need of a credit card, opt for one that has minimum interest rates.
• Nowadays the most basic and widely used method of debt management is debt consolidation. Debt consolidation refers to the consolidation of one's debt into a single account. Debt consolidation helps taking out a loan to pay off many other debts. Consolidation companies such as ABSA, Ned bank, Old Mutual Bank, First National Bank etc. usually offer debt consolidation loans. Since the debt consolidation loans form a part of home loan they are offered at low interest rates. As a result more and more people are attracted towards these loans.
But the fact is that loan consolidation too comes at a price. Though it may relieve you of your repayment amount and terms yet finally you end up paying more by way of interest rates or service charges. So you should always think before going for debt consolidation.
• If the debt consolidation process does not suit your condition then repaying with a windfall, if you happen to receive one, or drawing up a debt reduction plan are other alternatives to it.
• You must try and understand the debt to income ratio. Debt to income ratio will help you know about your financial health. This can tell you about your debt paying capacities. With little intelligence the individual borrowers can calculate this ratio for themselves. The main point of concern in calculating this ratio is to find out how much of your monthly income is available to meet a monthly debt obligation after paying off all regular fixed monthly expenses.
• Learning about home equity loans is also a wonderful idea. Home equity is the difference between the unpaid balance of your mortgage amount and the fair market value of your house. Home equity loans can be effective in paying off your debts because of their lower interest rates and tax benefits. A home equity loan is ideal if you have to meet timely expenses such as college tuition fees, installments of you car, refrigerator, electricity bills etc.
There are two types of home equity loans in which either you can pick up the complete loan amount upfront and pay it back gradually in installments or you can use it as a credit line drawing money as and when you need it. The upfront home equity loans are beneficial for paying off huge debts such as medical bills, car purchase etc.
• However auto loan, subsidized student loan etc. are other cheaper options available.
About the Author
Mansi gupta recommends that you visit http://www.debtconsolidationlowdown.com/debt_management/index.html for more information on Debt Management.
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