A Debt Management Program - Spendonlife.com

If you are in the terrifying grip of a credit crisis, you know how difficult it is to get out. A professional debt management program can help you get out of debt. It can also teach you basic money skills like budgeting which will prevent you ever going back there.

Types of Debt
There are two types of debt. Working with a debt management program can help you identify the enemy and take steps to remedy the problem.

Secured debt means the creditor (or person) you owe money to has the legal right to repossess the goods or property that the loan is secured against. Examples of secured debts are mortgages, secured loans on property or hire purchase (HP) normally found on vehicles.

Unsecured debts are not secured to anything and therefore the creditor does not have the automatic right to repossess any goods even if you are struggling to repay the money that you owe. Examples of unsecured debts are credit cards, loans, store cards, catalogues, overdrafts, and income tax bills.

A debt management program will show your how to consolidate into one payment:

Credit card debt

Unsecured personal loans

Medical bills and other consumer credit

These programs can also help you through a debt reduction phase.

Understanding the Psychology of Credit
Credit card debt is the most cunning adversary to securing your financial future. Credit card companies use enticing promotions to lure consumers by increasing their credit limits and offering tempting pre-approvals. Would you like a new car? A boat? Home improvements? All of these strategies attempt to install the habit of spending now and paying later.

Many people don't realize how destructive this habit is, until their credit card payments overwhelm their monthly budget. Credit card debt, as a percentage of income, has been steadily on the rise for the past two decades. It may be difficult to break the habit of using credit cards but the reward is worth the effort. Living on a cash basis can bring tremendous peace of mind. It actually aids decision making. Can you afford it? Only if you've got the cash.

If you find yourself in debt and are having difficulty managing it, notify your lenders. It's better to let them know in advance of problems so a debt reduction program can be worked out.

Debt Repayment Plans
A debt management program will come up with a repayment plan. But it does not erase your credit history. Under the Fair Credit Reporting Act (FCRA), accurate information about your accounts can stay on your credit report for up to 7 years. A bankruptcy can stay on your report for 10 years. In addition, your creditors will continue to report information about accounts that are handled through a debt repayment plan. You can keep watch over the state of your credit rehabilitation with free online credit reports. You're entitled to one a year from each major credit bureau.

Creditors may report that an account is in financial counseling, that payments have been missed, or that there are write-offs or other concessions. But a demonstrated pattern of timely payments should help you get out of bad debt in the future. It takes some discipline to get through a program, but the outcome is worth it. Feeling debt free gives you a feeling of independence. Knowing that you have paid off all of your bills is an amazing feeling.