While managing debts it is very important to differentiate debts into priority and non priority debts. Priority debts are like your house mortgages or car loans and losing both of them could be a massive blow for you.
You should try to pay off first your priority debts first and once you are through shift your focus to non-priority debts.
Some of the priority debts, besides your house and car loans are council tax, business rent, electricity and gas bills, income tax/vat and others. Failure to pay off some of your priority debts can also put you behind bars.
Is it right to opt for managing debts plans?
Debt management plans are now flooding the market. Though you are the best person to manage your own debt, and you should take up debt management plan as the last weapon.
Debt management plans are available in following cases:
1. It is applicable for those who are in no position to repay their unsecured debts
2. For those who don’t want to remortgage, despite having lot of equities in properties, for a secured loan
3. For those who owe money to minimum of two companies
4. For those who want to keep their debts a secret from their family
What are the advantages of such plans?
When you have such plans, it gives you more confidence in repaying the loans. You can now believe that you have more control over your assets and now you can handle your debts better than ever before.
The company offering you the debt management plan will take all the responsibility and would do all the leg work for you. From running around and meeting your creditors to drafting complicated letters, they will take all head ache. In fact your repayment money would also be handled by the management firm. The debt management firm will redistribute the money to the creditors while you start making plans to save money for a healthy life.
Disadvantages of such plans?
Before signing up with such debt management companies you should be sure of what you want and double check the services the company is offering. Such companies are very clever and are interested in clients, who own a house, which can be used as a guarantee in paying debts. Their fees are also too high and it would be better if you start managing debts on your own rather than depend on any third party.