The Problem of Bad Debt
The Problem of Bad Debt
It’s unfortunate that personal debt is currently a major problem the world over. But with each new product on the market, the range of products and the number of options that people have becomes larger. This means that as credit becomes more readily available on cards, for example, or with other methods of borrowing money – such as personal loans, though under-cons intensely regulated, becomes more widely available.
With this comes more demand and for many people, developing a bad debt problem becomes unavoidable.
At this point, depending on how badly their circumstances have become is entirely, they have probably entered the dark tunnel of bad debt and accepted this situation.
This is not, however, a voluntary situation, and the individual really should take responsibility for their actions as it is imperative they deal with their situation as soon as possible and not look back, as this will not help them.
Many of the personal loans that are given out today were basically designed with people in their position. Because whatever the purpose of the loan, there is always a need to pay it back and with whatever interest rate it comes with.
It is well known that more than 40 million people in the UK cannot afford to keep up with their minimum repayments on their credit cards. This is a massive number and covers virtually every section of society and levels of income.
The institutions are therefore well aware of the situation and are happy to recover whatever they can, securing other monies from people who are unable to repay their debts.
A debt management plan is one way of dealing with debt problems. As the plan is a legally binding agreement, it can prevent the unpleasantness of bankruptcy proceedings. There are some aspects of a debt management plan that need to be considered.
The plan is quite straightforward. An assessment of an individual’s financial situation is carried out along with a full disclosure of information about the individual’s assets and liabilities. If this information can show that further action can be taken, then agreements may be made to repay the debts in a more affordable way. In some instances, this will involve freezing the interest charged.
As well as this, a common feature throughout the debt management plan industry is that the debts are frozen. This means that creditors cannot chase the debt when the child is unable to make their repayments. However this will vary from company to company so it is advisable to check your terms and conditions to ensure that the freezing of interest charges does not in fact extend to chasing the debt.
Another feature of the deal is that interest will stop being charged on the debts – at least for a bit of time. Many students find that when their studies are complete and they have to start making repayments on their student loans and/or personal loans, that the interest always starts to run again, regardless of whether they are in a full time job or not.
It can be hard to believe that practically speaking, 12 years ago the idea of a debt management company was almost unimaginable. But today there are a lot of them, they have been proved viable business models and are infinitely better set up to deal with a bad debt situation.