Debt Management

About Debt Management

 

Debt is when you are owing money to another person or entity. Depending on the arrangement made, you are required to pay back both the principle amount owed plus interest over a period of time. Debt may be secured tied to a collateral like a house OR unsecured such as credit card debt or a personal loan. Depending on the loan as well, your debt may be fixed at a certain rate such as a fixed rate home loan or a variable rate such as a home loan tied to the base rate.

Debt management is a way to get your debt under control through financial planning and budgeting. The goal of a debt management plan is to use these strategies to help you lower your current debt and move toward eliminating it completely. You can create a debt management plan for yourself or go through credit counseling to help you with your plan. With Wealth Vantage Advisory, we will help you create a debt management plan that is suitable with your current condition.

WVA Debt Management Principles

  • The following are some of the methods that can be done to reduce Monthly Commitments through Debt Management

     1. Balance Transfer​

  • Can be done either of the following ways

  • Transferring your credit card balance from one service provider to another

  • Switching your credit card balance to a term loan (generally with the same service provider)

  • The credit that is transferred usually has a lower interest rate (and might be 0%)

  • Issue with this method is that it creates such as easy solution to get out of debt, without solving the actual issue behind why the debt accumulated in the first place, and most often that not, you will accumulate more debt after you’ve done this step.

  • 2. Snowball Method

  • This method focuses with settling the smallest amount of debt first without taking into account the interest rates.

  • The ability to achieve the small wins, will ultimately increase your motivation levels to continue paying off your debts, until you have settled your overall debt issue. This method is slow and steady, and will not improve your monthly cash flow situation in a short period of time.

  • 3. Avalanche Method

  • Compared against the snowball method, this method focuses on the debt with the highest interest rate without taking into account the amount owed.

  • This will help to reduce the impact of the interest rates which will in turn reduce the amount of additional interest paid to the banks or financial institutions.

  • Similar to Snowball Method, this method takes time before your monthly cashflow situation improves.

  • 4. Debt Consolidation

  • Consolidation works by taking all the smaller but higher interest debts e.g. Credit Cards, Personal Loans and convert it into a mortgage loan through refinancing, which will reduce the monthly repayment. You can also use personal loans to consolidate other higher interest debts apart from mortgage loan if the refinancing option isn’t available for you.

  • We’ll be explaining debt consolidation in the next following slides, as this step will be able to help you improve your monthly cash flow situation in a short period of time.

  • 5. Debt Negotiation

  • Another way to manage your debt situation is by negotiating with your creditors.

  • Most individuals prefer to run away from the creditors instead of meeting up with them to discuss the possibility of re-negotiating your debt.

© 2020 Wealth Vantage Advisory

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