Debt Reduction Plans - How To Improve Your Finances Using Debt Payment Plans

Debt reduction plans are very common in the US and in the UK. These well established arrangements are also known as debt management plans or debt payment programs and the process of using them is sometimes referred to as debt consolidation in the US. In this article I will explain exactly what these plans involve and offer some advice on what you need to bear in mind if you want to find a debt management company who can help you.

Many people experience various types of serious debt problems, and your particular circumstances will dictate which solution is best for you. Debt reduction plans are one of the most widely used tools to tackle consumer debt problems, but they are not suitable for all situations. It might save you time to have an understanding of the type of circumstances that you would normally be in for such a plan be effective.

Debt reduction plans may work for you if you are struggling to repay a considerable amount of unsecured debt to at least two or three different creditors. Unsecured debts are things like credit card debts, personal loans, store cards, etc. Secured loans and mortgages cannot be included in these plans. The other thing you need in order to be offered a debt reduction plan is a source of income, which will leave you enough to make a reasonable monthly payment after covering your living costs. You will need to apply to a debt management company who operates in your country of residence, and there is plenty of choice in the US and the UK.

If you think that your situation might be too serious for a debt reduction plan, and that you would struggle to afford the monthly payments, you may need to look into debt settlement instead. This is a more radical solution and involves an actual reduction in the amount of money owed by negotiating agreements with your creditors to write off part of your debt. The equivalent solution in the UK is an IVA, or individual voluntary arrangement.

What happens with debt reduction plans is that a debt advisor deals with all your creditors and negotiates new arrangements for paying back all the money you owe. This will generally mean that interest payments and penalty charges get reduced. They do not involve any form of new borrowing, so you do not incur any new debt. The result of the negotiations is that you end up with one modest monthly payment that you make to the debt management company, which they then pass on. You stop being hounded by your creditors and your life hopefully starts to get back to normal.

If you think a debt reduction plan could be the right solution to your predicament, the first thing you need to do is find a good debt management company. This is easier said than done and should be taken very seriously, as failure to find a reputable organisation could leave you worse off than before you sought help. A good company will look at your situation and tell you honestly whether a plan is going to provide the best solution for your particular circumstances. A less reputable company will just try to sign you up for whatever will make them most money, irrespective of the effect on your finances.

Whether looking for debt management, debt settlement or an IVA, your approach should always be the same, to start with recommended companies that you know to be well established, ethical and with a track record of having delivered the goods for many other people already. The other sensible thing to do is apply to two or three and then compare what they offer you, as proposals will vary.