DEBT MANAGEMENT Sub : Business Environment

Presented By : Pooja Jaiswal

Roll No : GM062
DEBT MANAGEMENT What do we mean by Debt ?
An amount owed to a person
or organization for funds
borrowed. Debt can be
represented by a loan note,
bond, mortgage or other
form stating repayment
terms and, if applicable,
interest requirements. These
different forms all imply
intent to pay back an
amount owed by a specific
date, which is set forth in the
repayment terms.
DEBT MANAGEMENT
Types of Debts
DEBT MANAGEMENT Consequences of rise in Debts

• Bankruptcy

• Liquidations

• Sleepless Nights

• Disappearance

• And the most

important ->
DEBT MANAGEMENT What do we mean by
Management ?

Management is nothing but Intellectual Goalmaal

DEBT MANAGEMENT The solution to avoid the
consequences of the rise In
huge debts, a new program
came into existence, and
that is the concept of

DEBT
MANAGEMENT
DEBT MANAGEMENT DEBT
MANAGEMENT

Debt management, by the standard financial

definition, involves a designated third party
assisting a debtor with repayment of his or her
debt. Many companies specializing in credit
counseling offer debt management plans (DMP)
to help people with heavy debt and damaged
credit get their financial situation under control.
DEBT MANAGEMENT Process involved in Debt
Management

1. Debt Management: Credit Counseling

In debt management, credit counseling is the first step to

recovery. The counselor and consultant sits across the table
with you and all your debts are analyzed. The consultant will
tell you about the working of your debt and will also explain
you all possible reparations. Then with the help of regular
pro-rata calculations, he will sketch out a good, debt
management plan, which would include, a structured
repayment schedule that has minimal fines, fees, interests
and APR's. If the debt is reasonably good, or less, then
counseling does the trick, however if it is huge, further
measures have to be taken.
DEBT MANAGEMENT Process involved in Debt
Management

2. Debt Negotiation and Settlement

The concept of debt negotiation and settlement is the second part

of the plan. Instead of just giving debt management tips and plans,
the company and consultants, negotiate a reduction of the total
debt amount, knocking off some fess, fines and charges. Some
debt settlement programs make claims in advertisements, by
advertising a record of 70% reduction of debt. The bad part of the
negotiation and settlement is that the credit rating and credit sore of
the person come crashing down. You can have a look at debt
settlement negotiation and debt settlement negotiation letter for a
comprehensive explanation.
DEBT MANAGEMENT Process involved in
Debt Management
3. Debt Consolidation Loans

Debt assistance programs in certain cases also provide a

certain loan known as debt consolidation loan. This loan is
calculated as follows…

consolidation loan = total amounts owed + interest and

APR's + late fines and charges - negotiated settlements

This debt consolidation loan is basically a long term loan

which is also a secured loan and tends to have a low rate of
interest. This loan is then repaid to the debt management
company who acts as a lender and originator.
DEBT MANAGEMENT What are Debt Management Ratios ?
Whether you say it equity multiplier, debt-equity
ratio or debt ratio, they mean one and the same; to
measure how much a creditor uses to fund assets.
There may be other forms of financing for a
company like personal savings and stocks, but
these are not included in debt management ratio.
For calculating the debt ratio, you need to divide the
total debt by total assets. So the formula is:

Debt Ratio = Total Debt/Total Assets = Total Assets

– Total Owner's Equity/Total Assets
DEBT MANAGEMENT Need for Debt Management
• Consolidation
If you have several high-interest credit accounts, then you may be able
to reduce your overall debt by consolidating under one loan. When
you consolidate you will be reducing several sets of service charges
and finance fees down to just one, and you can lower your interest
obligation by getting a consolidation loan with a lower interest rate
than your credit cards.
• Debt Settlement
If you cannot pay your monthly payments then, negotiate a final pay-
off amount on the interest and principle you owe, and then ask for an
installment program with a payment you can afford. Negotiating a
debt settlement can have a negative effect on your credit score, so be
sure you want to pursue debt settlement before you begin speaking to
creditors.
 Cont…..
• Stay Within Your Means
Develop a monthly budget that compares your bills to your income.
When you decide to take on new debt, make sure that the new debt fits
in your monthly budget to avoid spending more than you can afford. If
you can see what you have to spend versus what you are already paying
for, then you can make better decisions about whether or not you can
afford more debt.
• Debt Counseling
Managing debt can be complicated for some people. If you find the idea
of managing your debt to be appealing, but you lack the confidence to
take action, then consider speaking to a professional debt counselor. A
debt counselor can help you set up a monthly budget, and he can also
offer advice on how to best approach paying off your existing debt. 
DEBT MANAGEMENT
How to Choose a Debt Management Program

The Federal Trade Commission has stated some important requisites

and must-haves that the service must include. Hence, make sure that
conditions such as appropriate counseling license or debt counseling
are fulfilled by the service provider or not.

It is also advisable to have a debt management program in your

locality.

Debt management program reviews will also come in handy when

you are looking for a debt management company or services.

Also check, in what way does the debt management program affect
credit score, as there are chances it might have a negative effect on
the credit ratings and the program might appear in the credit history.

Lastly, check the commission and fees for the program.

DEBT MANAGEMENT
DEBT MANAGEMENT Debt Management Programs: Pros
– The first advantage of the program is that it
successfully reduces your over flowing debt
without harming any of your personal assets.
– The second advantage of the debt
management program is that the credit report
is not affected drastically and credit score also
does not suffer.
– Proper planning, and in some cases
negotiation, has a really good result as the
debt is repaid quickly without the unnecessary
APRs and fees.
DEBT MANAGEMENT Debt Management Programs: Cons
– There are not many disadvantages, the first
one being that a substantial fee or commission
is charged by the debt management program.
– The second probable disadvantage is that the
debt negotiation process harms the credit
report and reduces the credit score.
– The third disadvantage is that the program
counselor may ask you to shut down some of
your credit cards, though this should not be
actually viewed as a disadvantage.
DEBT MANAGEMENT RESULT

Thank You