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Debt Management – Pros & Cons

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.

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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.

Article Source: EzineArticles.com

Debt management isn’t for everyone. Some people don’t like the idea of delegating their financial affairs like this.

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Saving VS Investing Money

Before you start on your journey to assembling wealth and finding money independence, it’s necessary you perceive many basics. One among the massive keys is that saving and finance are 2 connected, however freelance, processes that you just shouldn’t confuse. A disciplined capitalist might notice himself with dozens of land rental properties however unable to pay his bills if he didn’t appreciate the equalization act between the 2 foundations of success.

Perhaps the simplest place to start for brand new investors is to outline the distinction between saving and finance.

    Saving is that the method of putt cold, notes aside and parking it in very safe, and liquid (meaning they’ll be oversubscribed or accessed terribly} very short quantity of your time, at the most many days) securities or accounts. this could embody corp insured checking accounts, savings accounts, short certificates of deposit. It will even embody corp insured market accounts (but not market funds, that don’t seem to be insured). the best goal for these funds ought to be capital preservation, with a secondary goal to stay pace with inflation, if attainable.

     Investing is that the method of victimization cash (called “capital”) to shop for AN quality that you just suppose can generate a secure and acceptable come back over time, creating you wealthier with every passing year. AN investment will embody something from a little business to creation, rare wines to gold coins, comic books to stocks, mutual funds, bonds, land, and antiques, simply to call many. It also can embody song rights, patents, trademarks, or alternative property, because it is commonly referred to as. smart investments are the soundest means of growing flush however will take time, even perhaps years, to figure out as a result of we tend to board AN unsure world.

How Much ought to I Save Versus what proportion ought to I Invest?

Saving perpetually comes 1st. consider it because the foundation upon that your money home is designed. the explanation is easy – unless you inherit an oversized quantity of cash, it’s your savings that may give you with the capital to feed your investments.

There are 2 primary sorts of savings programs you ought to embody in your life. They are:

As a general rule, your savings ought to be enough to hide all of your personal expenses, together with your mortgage, loan payments, insurance prices, utility bills, food, and article of clothing expenses for a minimum of six months. That way, if you lose your job, you’ll be able to have enough time to regulate your life while not the intense pressure that comes from living payroll check to payroll check.
Any specific purpose in your life that may need an oversized quantity of money in 5 years or less ought to be savings-driven, not investment-driven. The securities market within the short-term is very volatile, losing quite five hundredth of its worth in a very single year. buying a house is an excellent example as we tend to mentioned in Best Places to take a position Your payment cash.

Only at that time this stuff ar in situ, and you have got insurance, must you begin finance (this very is significant – for a lot of data on why, browse finance in insurance – one amongst the primary Lines of Defense for Your Portfolio. the sole attainable exception is putt cash into a 401(k) arrange at work if your company matches your contributions. That’s as a result of not solely can you get a considerable tax deduction for putt cash into your retirement program, however the monetary resource primarily represent free money that’s being bimanual to you on a silver receptacle.

More data concerning Saving cash

For a lot of data concerning however you’ll begin saving cash, browse the whole Beginner’s Guide to Saving cash. it’s full of articles, resources, essays, and lessons concerning a way to economize, a way to invest cash, and the way to urge started on the road to wealth. it’s going to appear intimidating currently, however each victorious successful person had to start by earning cash, defrayment but they earned , taking those savings, and putt them to figure in comes that threw off dividends, interest, and rents. they’re no higher than you’re. If you learn identical factor, and may act as rationally thus on manage your cash with discipline, you’ll get pleasure from the rewards of success, even as they did. In the end, saving cash comes right down to basic math. It very is as basic as 2+2=4.

Article Source: http://EzineArticles.com
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