Debt Management Plan Guide

Debt Management Plan Guide

If you are considering making a debt management plan, you should weigh up the advantages and disadvantages.

Debt Management Plan Advantages

Here are list of the advantages of taking a debt management plan:

Freeze Interest Payments

Your interest payments may be frozen by your creditors which means that your outstanding debts will not continue to rise. However this is only a short term measure and doesn’t usually applied to the term of the loans.

Reduce Your Monthly Payments

A debt management plan may enable you to reduce the amount of your monthly payments. This is usually achieved by consolidating your debts and repaying them over a longer payment period.

Suspend Legal Proceedings

Agreeing a debt management plan with your creditors often means that you can suspend any legal proceedings against you such as county court judgments. But only are these expensive to combat, but they also have serious consequences on your credit rating.

Avoid Insolvency

By arranging a debt management plan, you will avoid formal insolvency procedures such as bankruptcy or involuntary.

Debt Management Plan Disadvantages

Here are list of the advantages of taking a debt management plan:

Poor Credit Rating

Taking out a debt management plan does not mean that you will avoid negative scores on your credit rating.

Informal Arrangement

A debt management plan is an informal arrangement that allows your creditors to change their mind at any time.

Accrue Interest

Even when a debt management plan is in place, you will continue to pay interest on your debts which may be charged at higher rates than the original loan.

Larger Long-Term Payment

By consolidating your debts into one loan that you can afford to pay every month, you’re likely to be increasing the amount of money that you owe because the turn of the loan is likely to be extended.

Longer Term Debt Repayment

The arrangement of a debt repayment plan means that you are likely to be paying your debts for a longer period of time.

Deciding to make a debt management plan is not an easy process so you should consult with debt management professionals who will be able to give you the best advice.

News about Equity Release

News about Equity Release

Equity release is gaining a lot of publicity at the moment, partly because of its increasing popularity as a method of providing money for older people and partly because of some concerns about effects of taking out an equity release plan like a Lifetime Mortgage.

Many people may have heard about equity release but it’s likely that a large proportion of these people understand the concept of releasing money in their homes – but do not understand the details of how an equity release product works, and the charges they may need to pay.

If you are interested in releasing money from your house, you need to speak with a qualified and accredited consultant in order to fully understand the impact that an equity release product might have on your estate, beneficiaries and finances. There are many product options and these need to be carefully explained to you.

Things to Know about Equity

Equity release is not a low-cost way of releasing money in your home. Whether you choose a Home Reversion Plan, or the more popular Lifetime Mortgage, there will be costs incurred for setting up the plan and a loss of capital through interest accumulation and/or loan terms.

Which Equity Release Product?

Which Equity Release Product?

When considering the best way to release equity from your home, you are likely to encounter four different types of regulated products:

1. Lifetime Mortgage

Lifetime Mortgages are the most popular method used by people to release equity from their property. Their popularity is probably due to their simplicity: you borrow a percentage of the value of your home and only repay the money you have borrowed when your home is sold or you move into care. There are no monthly payments to be made like a traditional mortgage but interest accumulates in a compound way on an annual basis.

2. Interest Only Lifetime Mortgage

An Interest Only Lifetime Mortgage works in a similar way to the Lifetime Mortgage outline above except that you pay the interest on the loan. The payments are made on a monthly basis and so will know exactly how much money will need to be repaid to the provider of the mortgage when your home is finally sold. You will need to make sure that you have regular monthly income that covers the monthly mortgage interest payments.

3. Flexible Drawdown Lifetime Mortgage

A Flexible Drawdown Lifetime Mortgage is another type of Lifetime Mortgage but it operates in a different way. You are provided with a cash fund in exchange for a share of equity in your house and you can make withdraws from the fund when required until the whole fund has been used up. The principle of Flexible Drawdown Lifetime Mortgages is the same as flexible drawdown pensions.

4. Home Reversion Plan

A Home Reversion Plan operates on the same basis as a Lifetime Mortgage except that you sell a percentage of your home instead of borrowing against it. When you come to sell your home or move into care, the provider of the Home Reversion Plan will reclaim the money they have loaned you.

You can receive your money in the form of a lump sum or monthly income, and no monthly payments are required.

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