Eliminate Debt with a DMP and Family Budgeting
Manage Money via a Debt Management Plan to Boost Disposable Income
Mar 26, 2009
Credit card debt can creep up unawares and cause a lot of misery. What begins as a small personal loan can spiral out of control, not least because of bank charges such as late payments and colossal borrowing fees. Following four guidelines can help resolve the problem.
Claiming Benefits
It is surprising how many people do not receive all the money, which they are entitled to. Before taking any steps, check that everything has been covered. Directgov has an online benefits adviser, which calculates via questionnaire whether someone is entitled to certain benefits and tax credits.
Household Budgeting to Increase Monthly Disposable Income
It is a good idea to work out a monthly personalised budget. This involves adding up the total income and deducting the total outgoings.
- Annual Income: Adding wages after tax with benefits and interest from savings.
- Annual Expenditure: Adding all the annual household bills (not including the debt).
The monthly disposable income is ascertained after the annual expenditure has been deducted from the annual income and divided into twelve. A clear picture will soon emerge on how much nonessentials needs to be budgeted, for instance, nights out. Martin Lewis offers excellent advice on money management, tips on how to increase earnings and to make the most of the disposable income.
Working out the Size of the Debt
This is the unpleasant part, but knowing is better than avoiding the issue. This involves adding all overdrafts, hire purchases and personal loans.
Which Debt Management Companies Should be Avoided?
With the monthly expenses and the total amount of the debt worked out, it is time to contact a debt management company. Some charge for their services and should be avoided. Payplan, however, is a charity run service, subsidised by the credit industry. They will discuss the situation over the phone and work out a Debt Management Plan (DMP). In certain cases, the debt could be written off if the credit company has missold a loan agreement. Specialist advice should be sought on such a matter.
Seeking Budgeting Advice for a Credit Card Debt Solution
A Debt Management Plan is an agreement between and individual and the creditors on an affordable way to pay off the debt in manageable monthly instalments. As soon as the DMP is in force, creditor’s fees, charges and interest are frozen, and in some cases, suspended. It depends upon the circumstances and the discretion of the creditor. It must be noted that hire purchases and personal loans cannot be included in a DMP.
National Debt Line (NDL) is a charity-run service that also helps find solutions and work out DMPs. For further advice, the Citizen’s Advice Bureau is a free service that provide further useful contacts.
- The bad news is that an individual’s credit rating will be affected.
- The good news is that debt can be faced and overcome before it spirals out of control.
Using a Debt Programme and Budgeting Finances
Facing debt is better than putting it off. Claiming all benefits is a good strategy to help get out of debt. This can be used to work out the monthly disposable income and work out household budgets. Importantly, establish the size of the debt. By contacting a debt management company, a DMP can be worked out with the view to eliminate credit card debt.
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