There are two main types of debt plan and these are designed to deal with different situations. Usually when we use this term we mean a debt management plan, or DMP. The other option for dealing with financial problems is known as debt settlement. I will explain the differences between these two approaches so that you understand what situation each is meant to address.
With a DMP the aim is to repay everything that you owe. When you are struggling to keep up with payments on bills, you can use a debt management company to negotiate with your creditors to set up new arrangements for the repayments you have to make. They will try to get interest rates reduced and will often manage to persuade the creditors to waive charges such as late payment penalties. As a result of these changes they are able to significantly reduce the amount you have to pay each month towards your debts.
Instead of paying all your separate debts, you will make only one single monthly payment to the debt management company. It is then their responsibility to pass on the agreed amounts to your creditors, and to deal with them over any queries. This system of consolidating all your bills into a single payment has huge advantages in terms of simplicity and brings great relief in not being bothered by creditors.
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College is one of the most exciting and memorable phases of life for most of us. Responsibilities are few except to sustain life within the limited resources at hand, especially if you are pursuing your studies away from home.
While at school, or maybe even just after you graduate, money management can be very challenging. Your budget may be tight, leaving you little room to be extravagant with your spending. Looking for the tiniest of ways to save money is crucial to avoid debt problems in the future. Here are a few tips for staying on top of your financies:
* Stop impulsive purchases. Before you buy anything, ensure it is truly necessary. Do not get into the habit of buying things just because your friends do.
* Keep credit card spending at bay. When you know that there is a planned outing with friends, just carry enough cash to cover your share. Do not carry your credit card around when you know you might succumb to the temptations of shopping.
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You might have been a little intrigued about the title of this article. The four C’s that I was referring to were nothing but character, capacity, capital and conditions. These 4 C’s will essentially dictate the quality and quantity of credit that will be made available for your small business when you apply for a loan.
This article will briefly go over each one of the 4 C’s. You can then evaluate yourself to gauge your financial strength as seen in the eyes of lending institutions.
Character – Just like a person’s character, the character of a business will be taken into account before a loan is awarded. A lending institution like a bank will check up on various things such as size of the business, number of employees in the business, duration of existence and so on. Essentially, a character check on a business will be a reputation check on the business to see if they have made news for either the right or the wrong reasons.
Capacity – Capacity of a business is nothing but its ability to repay. The bank will analyze financial statements such as balance sheet, cash flow and the income statement to gauge the financial strength of the business. The bank will need to feel confident about the financials of a company, especially its cash flow, before they release the funds of a loan to your business. If your business has a struggling cash flow, it is highly unlikely that a bank will award you a loan for your business. Also, the bank will be interested in the amount of debt or credit that your business already carries.
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Posted in Credit, Fianance Consulting, Finance, Finance Plan
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Tagged Bank, business, Company, Credit, Debt, Financial, financial environment, financial statements, financial strength, lending institutions, loan, small business
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