Debt management is a process by which you can manage your debt by repaying it in an affordable way. It involves both managing the amount of your debt as well as paying it off.
The types of debt management include:
Debt consolidation – This is the process of combining multiple debts into one loan or credit card to pay off the debts. It is also known as consolidating or unloading debt.
Debt settlement – In this method, you negotiate with creditors to settle the amount owed on your account and make payments for a specific period of time until the full amount is paid back in full. You may have to pay interest during this period.
Debt counseling – This method helps you manage your debt by providing advice on how to reduce it and save money that would otherwise be used to make payments.
Importance of Debt Management
Debt management is important because it helps you manage your debts, pay them off and take control of your finances. It’s also important because it can help you build a stronger credit history.
Debt management allows you to:
Get organised – organise your debts so you know where they are, when they need to be paid and what interest rate they have. You should also consider creating a budget for paying off the debt over time.
Track progress – keep track of how much you owe, how much interest you’re paying and how much money is left to save or spend on other things. This will help you see if there are any ways to pay less interest or make extra payments towards the debt.
Save money – using debt management services can help you save money by paying less interest or even making extra payments towards the debt each month. If this isn’t possible, then consider transferring some of your existing loan into a separate account with lower monthly payments so that you can use that money for other things such as savings or investments instead of putting it towards paying down the principal amount owed on your loan (this is known as “negative amortisation”).