If you find yourself in debt then there is one thing that can help you – and that’s having a plan. With a debt plan you can start to plot a trajectory to get yourself out of debt and to start improving your financial situation. If you come up with an in-depth debt plan that takes into account the facts and figures of your current financial crisis (such as your budget for food and daily living, your current income, the interest on your existing debt etc) then you can stick exactly to this plan and you should be able to predict the precise date by which you will have escaped debt. Of course life doesn’t always go to plan, so it’s important to keep this plan flexible and to keep re-addressing it.
Another kind of debt plan is a ‘debt management plan’, which is also known as a ‘DMP’. A debt management plan is a type of debt plan created for you by a third party organization. In cases where your debt is out of control, a DMP will involve a third party organization that looks at your debts and assesses your income and current budgets. This helps you to come up with a more professional debt plan that you can put your faith in, but it also takes this one step further as the DMP company will be able to re-negotiate interest rates and repayment schemes with your lenders. This then means that your debt can become more manageable and more tailored to suit your current finances. Of course the only downside of this plan is that the DMP company themselves will often require paying which means you are losing money (which you would not if you had tried to organize your own debt plan – and bear in mind you might also be able to re-negotiate the interest rates and repayment plan yourself if you get in touch with the lenders). Fortunately there are some DMP organizations that will provide you with your debt plan free of charge – charities and government agencies for instance.
Finally the term ‘debt plan’ might refer to the plan that you come up with when you initially take out your loan. Of course a prevention is better than a cure and so if you have a plan going into your debt this is preferable to using emergency measures once you are knee deep in debt. To prevent this problem, calculate how much debt you can afford before taking out any loans, and look into ways you can make this more manageable. When you agree your loan repayment schemes, make sure that you can make all your payments and that you find the lenders with the lowest interest rates.