In today’s world, money has become equally important for survival just like food, water and other resources. Indeed, it has become a huge inseparable part of our lives. One must know how to manage this asset efficiently. Money management, also known as investment management, is the process of managing money through various investments, budgeting, analyzing costs-income, payment of taxes and banking. Budgeting is the first step towards money management. One must keep a track where his money goes, including investments and debts.
Debts have started to become a way of life in present times. As long as you have the capacity to repay your debts, it’s a smooth ride. Debt starts becoming a big problem once you realize that you are unable to repay your debts. When a person faces debt related problems, they can opt for debt counseling or credit counseling. Debt counselors provide services like budget advice, monitor and restructure the payments, negotiate with the creditors on debtor’s behalf and after-care services. They can play the role of mediator between the creditor and debtor. The credit counseling agencies are empowered by a contract to act and negotiate on behalf of the debtors. As per laws of the United States, an individual who has filed for bankruptcy must receive credit/debt counseling. The counseling agency can devise a ‘debt management plan’, wherein, the counselor contacts each of the consumer’s creditors and requests them to lower the interest rates, lower the amount which is paid on monthly basis and to waive off any outstanding fees involved. The counselors may also negotiate to forgive a part of the debt, known as debt relief. The Federal Trade Commission (FTC) regulates such credit/debt counseling agencies.
Another option for the person who is struggling with various debts is to opt for debt consolidation loan.
Debt Consolidation Loans
Consolidation, as understood in layman’s term, means collecting together or bringing together. When a person is under the burden of several debts and is charged heavily by different interest rates attached to it, debt consolidation comes to the rescue. Debt consolidation involves taking up an entirely new loan to pay off all the other debts collectively. This process of clubbing together several unsecured debts into one, against a new loan that is more favorable in terms of interest rate and monthly payments, is referred to as debt consolidation. This financial tool can be used to get away from debts like credit card debt, student loan debt and other such types of debt which are not secured and not attached to particular asset. Most lending institutions offer debt consolidation loan against a security. Being a secured type of loan, the lender can seize the property in a situation when borrower defaults in payment.
It is important for every individual to prioritize their debts. It makes sense to pay off the debts involving a higher rate of interest. To avoid digging deep in the pool of debts, one must have a habit of saving money. Emergency savings come in handy in times of crisis. One must spend judiciously and control their expenditures so as to conquer debt. Like they say, an ounce of prevention is better than a pound of cure.