Before delving on what a debt management plan can do for you as an individual or as a business, it will be good to decide its scope. It is a misconception among many people that debt management plans can only be used for eliminating the existing mound of debts. Nevertheless, debt management plans have an extended scope. As the name suggests, debt management plans may be used with advantage to manage the debts to a particular level. It must be acknowledged that a proper management of debts makes debt consolidation and other methods employed to fight the menace of debts superfluous. Prevention is better than cure. Most of us repeat the adage incessantly. It will be through debt management plans that one can really develop the habits in ones life and dealings. However, the role played by debt management plans in working with the debts already incurred may not be discounted. Many people owe their financial survival to the debt consolidation loans that helped them counter bankruptcy and other debt related problems. The author has tried to illustrate the preventive as well as defensive uses of Debt management plans through this article. Since the defensive part of the debt management plan is more widely used, we will first discuss the various plans to deal with debts that an individual or business has already incurred. The various debt management plans that come in this category are as follows: o Debt consolidation loans The most conventional method of dealing with debts is debt consolidation loans. Debt consolidation loan is essentially meant to arrange easy finance for clearing the mound of debts. A single loan is drawn after consolidating the various debts. One aspect that distinguishes debt consolidation loan from other loans is that the borrower gets help and guidance from the debt consolidation loan provider in the settlement of debts. Expert negotiation skills and a proficiency in debt settlement recommend the services of the debt consolidation loan provider in this regard. o Debt consolidation mortgage Debt consolidation mortgage constitutes a major part of the debt management plans. A debt consolidation mortgage is basically a second mortgage. In this method, the borrower requests the mortgagee who holds the first mortgage to the home to repay his debts. In exchange, the borrower includes the debts while making the monthly repayments. The advantage of the debt management plan is that finance is available for debt consolidation at rates equivalent to a mortgage, i.e. at cheap rate of interest. o Debt consolidation through remortgage While debt consolidation mortgage entails dealing with the same mortgage lender, debt consolidation through remortgage involves shifting to a mortgage lender who offers a better rate of interest. In this debt management plan, the borrower or the mortgagor requests the new mortgage lender to include several debts along with the unpaid amount on the original mortgage for disbursement. Again, this will help the borrower get cheaper finance for debt consolidation at the rates of a mortgage. o Debt consolidation through credit cards Credit card as a debt management plan will be especially useful when the debtor wants a quicker settlement of debts. As in loans and mortgages, a credit card user need not wait for the debt management plan to be approved and sanctioned. Another advantage of credit cards as a debt management plan is that borrower is not required to pledge any of his/ her assets to back the loan. This can however be too expensive for the credit card user. o Debt consolidation through home equity loans Home equity loan is a secured loan taken against the equity in ones home. Home equity loans put a convenient method of debt settlement. A home equity loan is a multi-purpose loan that can be used with equal advantage whether in a debt management plan or for making home improvements. Since home equity loan is secured, it provides cheaper finance. However, the borrower needs to be regular in making repayments to protect his house from repossession. Article Source: http://EzineArticles.com/71603

Ultimate Guide to What Debt to Pay off First to Raise a Credit Score
Debt is like weight gain. To many people, an extra treat here and a little splurge there don’t seem like real problems.

Over time, though, the bits and pieces add up and one day they wake up and say, “How’d that get there?”

The good news is that it’s never too late. Paying off debt and improving a credit score are two of the most common financial goals. For people who do it right, they can score wins in both goals at the same time.

Below are answers to the most common debt and credit questions, from expert tips to what debt to pay off first to raise a credit score.

How Paying Off Debt Improves a Credit Score
Large debts and poor credit often go hand in hand. That’s why it’s great to know that working toward one goal will help with the other one as well.

Improves the Utilization Ratio
One of the many factors that impact a credit score is the person’s credit utilization ratio. This is the percentage of revolving credit that they’re using.

Revolving credit is any credit a person can use over and over like credit cards. If a credit card has a $10,000 limit, someone can use the credit, pay it off, then use it again.

It’s different from a car loan, for instance. If someone gets a $20,000 car loan and they pay off $5,000 of it, they can’t later use that $5,000 for something else.

It’s easy for people to calculate their own credit utilization ratio.

First, they need to add up the credit limits drp for all their credit cards. Next, they add up the balances on all those cards. When they divide the balance total by the credit limit, that’s their credit utilization percentage.

The goal should be to get a utilization ratio below 30%. However, the lower the better. Every dollar of revolving credit a person pays off will improve their utilization ratio.

Establishes a Record

Another important part of a person’s credit score is their payment record. The reason people have poor credit when they first turn 18 is that lenders have no record to tell them if the teen will pay their bills on time.

Let’s say it takes someone two years to pay off their debt. That’s two additional years of reliable payments on their record, which will

Helps the Debt-to-Income Ratio
In truth, this doesn’t affect a person’s credit score directly. However, one of the most common reasons people strive to pay off debt and raise their credit score is that they’re trying to buy a home. Their debt-to-income ratio plays a large role in their mortgage qualification.

As one would expect, a debt-to-income ratio calculates the percentage of a person’s monthly income that must go toward debt. It’s based on their minimum payments, not the amount they choose to pay.

With certain debts like credit card debt, the minimum payment goes down as the balance goes down. The result is a . Pay Off First to Raise a Credit Score

It’s clear that paying off debt improves a person’s credit score in several ways. For most people, though, their debt involves several types of accounts. Here’s how to prioritize.

Bad Debt
A credit score doesn’t just look at how much debt a person has but at the types of debt they have too. They can categorize the accounts into “good debt” and “bad debt.”

Good debt includes a mortgage and student loans. Investing in a home or a degree can improve a person’s financial situation in the future, making it possible for these debts to be productive.