You have a debt problem, but it’s not serious enough to get you into AKPK debt management program yet? Lucky you! If you don’t want to resort to enrolling in AKPK’s DMP or declaring bankruptcy in future, then make sure you start managing your personal debt now.

Here is Raymond Roy Tiruchelvam’s article on How to Manage Personal Debt.

THE “easier said than done” phrase latches on to this topic like ants to sugar. While getting into debt is made easier today with the many innovative marketing plans undertaken by financial institutions, getting out of if, leaves much to be pondered.

For those who do not see the light at the end of the tunnel, Bank Negara has introduced AKPK or Credit Counselling and Debt Management Agency. I am assuming a single source of funds being financial institutions, and not “ah-longs” and other unconventional sources.

There is actually one step to be undertaken prior to managing your debt, which is managing your cash flow. It does not mean that if one is a millionaire, there is no need for debt management … well perhaps there is no need, since the ability to source for debt is high, but everyone will need to manage their cash flow, let it be millionaires or paupers.

Let’s look at some steps that we can take to ensure that we are able to manage our personal debts so that we do not go into the “PN4” or “PN17” status (which for companies implies a financially distressed state).

Let’s start with liquid debts, credit card and car loans. For the former, never follow the minimum payment requirement of the bank, which is 5% of outstanding sum. The reality is that it does not diminish in 20 months (5% X 20 months = 100%) – which is the general misconception.

Instead, spread the payment over a reasonable payable period. For example, if you purchase a personal computer for RM1,500 perhaps, you want to make a RM300 monthly payment over 5 months, rather than pay RM75 in the first month, then RM71 for the second month and so on (assuming one follows the minimum 5% payment, excluding interest charge).

As a matter of fact, if one were to purely pay the 5% minimum payment, do you know that it will take 50 years for the sum to trickle down to RM100. And mind you, even with that, the debt won’t be fully settled.

As for car loan, do not take a hire purchase (HP) contract for more than 5 years. What would a car costing RM80,000 be valued at after 2½ years? Depending on the type of car, continental or eastern, a 5-year HP term will value it at RM40,000 (assuming a simplicity straight line depreciation, 100% hire purchase financing, excluding interest with zero value at the end of the payment term).

Assuming one needed cash, don’t you think it’s easier to find a buyer at RM40,000 compared to if you were to take a 9-year car loan whereby you will need to find a buyer at RM62,222 (remaining loan balance after 2 years for a 9-year HP plan).

Naturally, one would say if not for the 9-year term, he or she will not be able to afford the vehicle … but that’s exactly the point. If you can’t afford it, then don’t buy it!

Next comes personal loan. Firstly, it baffles me that banks are giving out “clean” loans today, meaning non-collateralised, non-guaranteed loans as personal loans to almost everybody with a monthly pay slip. If you are unable to pay, there is little recourse, as compared to hire-purchase loan, where you may have the option of selling the car. Hence, unless you are sure of the purpose and that the usage of the funds will return a cash flow, do not indulge in one.

Using electronic means via Internet banking and online payment systems is a good way to manage your cash flow. Today many banks have this facility that allows you to also format standing instructions to promptly pay a fixed sum on a particular date towards debt settlement. This will help you ensure that priorities take precedence. Therefore, it’s only the balance cash after settling debts that will be available for disposal.

What will be the comfortable debt to income ratio? Zero is preferable, otherwise a 25% maximum limit of disposable income is recommended. For example, if you had bought the RM80,000 car mentioned earlier, on a 5-year term; assuming a simplified zero interest scheme, you would be paying RM1,333 monthly installment.

Therefore following the 25% debt to income ratio, you should be earning a minimum of RM5,333 per annum. This is after tax and EPF, therefore gross monthly salary should be about RM6,200. So after reading this, do you think you have overspent on your car? There is no under-spending by the way, since the ratio is only an indicator, and I am sure you would probably want to also invest in a housing loan.

You can also increase your capacity to loan, by simply borrowing money to invest where the returns are higher than the cost of funds.

If you can find one an avenue that guarantees this position, then do inform me, I too am curious!

Raymond Roy Tiruchelvam is a former senior manager – economics and investment analysis at an oil and gas outfit.

If you think that you do not see the light at the end of the tunnel, then attend AKPK’s briefing to see if you need a debt management plan to help you get out of debt.

If you ask me the benefits of a debt management program, I can give you a long list. This is because I am a credit-card-debt woman who has been in AKPK’s free debt management program for one year.

Wow, it’s been a year since I started making monthly debt repayment to AKPK! You know, I have also been able to save extra money in my personal savings account as emergency fund due to the debt management plan.

A debt management program is one of the many debt relief options that a credit counselor might suggest when you’re having issues with credit card debt.

It is also a good option if you don’t want to apply for a debt consolidation loan or declare bankruptcy.

Okay, let’s see some of the benefits of enrolling in a debt management program.

1. Reduced Interest Rates. Once enrolled in a DMP, your credit counselor will negotiate with your creditors to reduce your interest rates.

Interest rates will vary depending on your situation and your creditors, most rates are between 2% to 9% and under certain circumstances, some creditors may completely eliminate their interest rate to 0% interest.

2. One Single Payment. Instead of making multiple credit card payments on various due dates, a debt management plan enables you to make ONE payment to One agency on ONE due date.

I will never forget those old days when I had to run 6 banks to bank in 15 credit card payments!

Now I only need to make one payment to the credit counseling and debt management agency’s collection account by the end of every month. The single monthly payment will then be distributed by the agency to the creditors.

3. Waived Late Payment Fees. If you have late payment fees for delayed credit card payments, the credit counseling agency will help you negotiate with your creditors to waive them.

4. Creation of a Budget. The program you choose usually will help you to organize your personal finances with the creation of a budget. In this way your credit counselor can make sure that you are able to make your monthly debt repayment on time.

5. Peace of Mind. With the help of a debt management plan, you are able to start organizing your money and seeing how the amount of debt reduces and your personal savings increases.

Of course, there are disadvantages of enrolling in a debt management plan too. Before you decide if a debt management program is right for you, check the other debt relief alternatives and balance the advantages and disadvantages.

I am glad that I have successfully saved RM1,000 as emergency fund in my personal savings account.

I mentioned that I would set up emergency fund in February 2008. Unfortunately, it didn’t work.

At that time, hubby’s income was meagre and unstable. My income was barely enough to pay the credit card payments, utility bills and car and home loan instalments.

February 2008? I didn’t even know there was such a credit counseling and debt management agency called AKPK and its debt management program (DMP).

I only got to know AKPK in April 2008 while I was watching a biz program. But even then, it didn’t cross my mind that I wanted to enrol in its debt management plan.

I was still trying to pay down the credit card debt without wanting to get help from the credit counselling and debt management agency. I kept telling myself that I just needed to work a little harder to increase my income and cut down a lot more on expenses and spending, then my credit card debt would be gone.

Well, God always has something better for us, right? I must say that it’s God who gave me the chance to bring my financial havoc back to the right track. God heard my desperate prayer for financial help and led me to the AKPK debt management programme (DMP).

My AKPK DMP was approved in October 2008. Since then, I have been making one low payment to AKPK by the 30th every month.

Paying lower monthly repayment to AKPK also means that it’s possible to save money as emergency fund.

As of today, the amount in my personal savings account has reached RM1,000. There is still about RM700 from Amazon.com; it takes more than a month for the check to clear.

Added up, I will have had more than RM1,700 in my personal savings account pretty soon.

If the envelope budgeting system or the Canada credit counselor and personal money management expert, Gail Vaz Oxlade’s magic jars works on hubby, it’s likely that there will be more money saved as emergency fund.

Are you burdened with too much credit card debt that you are thinking of applying for Malaysia’s AKPK debt management programme (DMP)? But, you are also worried whether AKPK, the credit counseling and debt management agency set up by the Central Bank of Malaysia, is a scam or not, right?

I understand. Been there and done that.

To thoroughly convince yourself to enroll in the debt management plan, read as many success stories of AKPK as possible. There are more success stories of AKPK or AKPK bloggers now if compared to last August when I submitted my application form.

Before you read others’ experience using debt management program, read the FIRST AKPK success story; it’s my bumpy journey from submitting the application form to being approved of the debt repayment plan.

And here is another success story that I would like to share with you. CEO, a man who is under RM200,000 credit card debt, has successfully applied for the AKPK debt management program recently.

He left a long comment at my credit card debt blog on August 1st, thanking me for sharing my credit card debt reduction and AKPK application process with others.

You don’t have to hop over to my credit card debt blog to read his comment. I have decided to copy and paste the entire comment on this debt management program blog for easy reading.

First of all, A BIG THANK TO YOU FOR THIS BLOG. You are not only a woman of courage to reveal all that detail, but you have helped me tremendously.

I just got out from the AKPK office, and they proposed to reduce my monthly commitment from nearly RM10,000 to just RM2,000 per month.

I got into a heavy credit card debt 5 years ago when a friend asked me to join him in a business. Trusting him, I quit my job, funded the business with my credit cards, supported HIM with a supplementary credit card which he took only 1 month to swipe up RM20k, and lastly he just ran away, leaving me to pay everything.

Finally, the economy hit my career, and this month I had to accept a drastic paycut. It scared me at first, but I decided that maybe there was a silver lining.

I found your blog. I read and re-read it until 3 am.

I thought — maybe, if I go to AKPK, and they reduce my monthly repayment, I can actually start seeing some SURPLUS from my smaller income. Better to have a small income but with extra money, than having a big income but nothing to show for it. Of course, with my previous 5-figure salary, AKPK would just kick me out, but now I had the advantage of the situation.

Last Monday, I braved myself to go to AKPK. It was the hardest thing to do, to be SEEN walking into debt counseling. I have appeared in the media before, television, magazines and newspapers. Didn’t know where to hide my face. I arrived at 11.45, and was put immediately into the intro class.

I was surprised to see quite a few “corporate people” in the class, dressed in their office attire. I don’t know if they were as ‘embarrassed’ as I was to be there. I sat down for 1 1/2 hours, after which I immediately went to Bank Negara to collect my credit report.

I made the earliest possible appointment to see a credit counselor. In the meantime, I went to each bank and collected any missing statements.

I went to see the counselor this morning. She was polite, comforting and never did anything to make you feel small. She said she would try to negotiate it down to RM1,800 a month for the first 2 years then RM2,200+ thereafter. I said never mind, let’s make it RM2,000 flat. I’m sure by the time the economy rebounds, I will be able to afford the RM2,000 easily.

She even guided me to fill up the application form properly (to fill the correct figures so the application can be approved easier). In short, she was there to help, and I mean REALLY help.

I got close to RM300k at first, but over the years, paying slowly, I have managed to bring everything down to under RM200k (which makes your RM60k something to smile about, actually!).

I have been earning 5-figures every month from my salary, yet I never get to taste my own money. My children have to settle for cheap clothings like poor kids.

Every month, I pay pay pay pay… I try to keep myself motivated, but it is tiring to wake up every morning, thinking to yourself, “I am running every day, only to stand still.”

She asked for the first payment of RM2,000 to be deposited, which I will do next week as the banks are closed today. From there, processing will take approximately one month.

She says no need to pay the creditors, if they call I just need to tell them I have submitted an AKPK application and fax the deposit slip if necessary.

Fortunately I am not yet under any legal problems, and most of my loans are still current. If you are thinking about doing it, do it now. It is important to take action at THIS stage before the banks start harassing you.

I do not really care that I will not be able to get any new loans until the 10 years are up. I am selling my house and just live with the car. Maybe not now, but when the economy goes back up, and my salary climbs back to normal, I should be able to save up for a couple of years, and pay for a new budget-priced apartment in cash. The important thing is I will now have a positive income and room to breathe, and I HAVE YOU TO THANK.

God bless you. Please keep up the good work.

Q: Does being placed in the AKPK debt repayment plan mean I no longer can use my credit cards?

A: Yes. You NO longer can use your credit cards; all your current and valid credit cards will be terminated once you are in the program.

Q. Is it true that no banks would approve my new credit card and loan applications?

A: Yes. As long as you are in the program and haven’t settled all your credit card debt, no banks would give you credit cards or loans.

Q: What about after I have successfully paid off my credit card debt?

A: Yes. You can apply for a credit card or loan again after your full settlement.

And judging from what I know about Malaysia’s banks, I am pretty sure that you can get a loan again and fast so long as you have CASH as down payment.

A good example was my car loan. It’s about 3 years ago. Of course, I was still able to manage my credit card debt at that time and never heard of AKPK.

The bank officer that was in charge of approving my car loan kept telling me that my credit card payment records were far from satisfying and it’s kind of difficult for him to approve it.

Well, in the end he still approved the car. Why? I traded my old car and I could get back at least RM5,000. With RM5,000 paid as the down payment for the car, tell me, which bank would say no?

Q: I heard that my credit score will be damaged once I am in the AKPK debt management plan. Is it true?

A: Since you are thinking of visiting AKPK credit counseling agency, it’s my guess that you have already missed a few credit card payments or you have stopped making payments to banks, right? I am sure your credit report should have been tainted badly because of these missed payments, right?

So, does it matter much if your credit report is hurt a bit more by you being in the debt repayment program?

In fact, being in the program helps rebuild your credit rating. Your monthly repayment to the credit counseling and debt management agency shows that you make payment every month.

Judging from my experience with Malaysia’s banks, so long as you have CASH …   You know what I mean, right?

Q: You seem to say a lot of good things about AKPK. Do you earn a commission for each referral?

A: I HOPE AKPK pays me commissions for all the information and good stuff about AKPK mentioned by me.

Of course, NO.

Q: Then, why do you talk about AKPK all the time and recommend it to every Malaysian who is in credit card debt?

A: The reason is simple. I am sick of seeing people selling credit card debt reduction solutions to people like you and me who are so deeply in debt and desperately trying to find ways to get out of debt.

Thinking back, I should not blame people who sell the credit card debt solution info. It’s human being’s mentality that FREE info is not worthy; only PAID info is valuable.

Since I was in the debt management program in October 2008, I have always been asked why I opted for a debt management program to get rid of my credit card debt.

There were a few reasons why I signed up a debt management plan and not any debt consolidation or debt settlement.

First off, the debt repayment plan I enrolled in is FREE. There is no initial fee or monthly service fee charged by the credit counseling and debt management agency.

Yes, it’s a free debt management program that is only available in my country. It’s not available to people in the US, UK, Canada and other countries.

As it’s a free debt relief program and I had come to a point that I couldn’t go on paying the huge amount of minimum payments, I decided to enroll in the debt management program.

But why didn’t I DIY debt management to pay off the credit card debt?

Oh, I did. In April 2007, I started self-help debt reduction to pay down some of my credit card debt before I joined the DMP. Between April 2007 and August 2008, I managed to bring down my credit card debt from RM63,809 ($18,000 in USD) to RM40,334.

Just as I thought my effort of tackling my credit card debt would pay off if I kept on budgeting and curbing my spending habits, bad things kept popping up.

First of all, the expenses always surpassed the income. Due to economy downturn, hubby and I were not making sufficient money to pay all the credit card minimum payments, car and home loan installments, utility bills and daily expenses.

When we failed to make payments on time, you know what will come next, right? Yup, banks and creditors started charging late payment fees, over the limit charges, cash advance fees, retail interest charges into my credit card accounts.

One day in August 2008, I told hubby that I had had enough of my credit card debt, non-stop phone calls from banks and warning notices issued by creditors. I wanted to get rid of them.

So, I am now in the free debt management program.

As a credit card debt woman who has been in a free debt management program since 2008, I am always asked why I opted to sign up a debt management program and didn’t do it myself.

First off, the debt management program I enrolled in my country is FREE; there is neither enrollment fee nor monthly service charge.

As far as I am concerned, there is only ONE credit counseling and debt management agency in my country. It’s different from the US where there are lots of non-profit and for-profit credit counseling agencies.

Since it’s free debt management plan that involves zero service fee, why not?

Next, contacting banks and negotiating a partial settlement or a reduction in the bills is more difficult than you think.

I DID try to call up and write in asking for lower interest rates. Out of six banks, only one bank agreed to reduce the interest rate to 9%. A few banks were between 12% and 15% while the rest declined to lower the 18% per annum interest charge.

When I found out that my credit counselor was able to negotiate with banks to reduce my interest rate from 18% to 6% and 7% for some banks, and most important of all, to waive late payment fess and over limit charges, it didn’t take me long to make up my mind.

I signed up the free debt management program after the certified credit counselor explained in details what a debt management plan was and reminded me a few times that all my card accounts would be included in the program and closed.

Take note: All Your Credit Card Accounts Will Be Closed Once You Are In A Debt Management Plan (DMP). Shutting down all your accounts means that it’s likely to damage your credit score.

Since my maxing out most of my credit cards had already harmed my credit utilization ratio, a key component of credit scores, it’s okay to shut down all card accounts.

If you are in the US, make sure you sign up with a credit counseling agency affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies.

An accredited credit counseling and debt management agency typically charges $30 one-time setup fee, and $15 per month while you’re on the debt management plan.

If you don’t want to deal with your creditors directly and you need help with all of your credit cards, opt to go through a debt management program.

Are you deep in debt and struggling to pay even the minimum payments? If so, you had better start using DIY debt management tips to help you get out of debt fast or seek help from credit counseling.

A credit counseling agency, either non-profit or for-profit, offers you credit counseling advice including how to use credit lines wisely; establish a workable budget; keep track of your bills; and best manage your money.

During a credit counseling session, a certified credit counselor will first gather as much information about your income, expenses and debts as possible. Once he has sufficient information from you, he will evaluate the information, discuss your situation with you and offer the most appropriate debt management advice for your situation to help you rectify your financial problems.

If it is determined that participating in an educational class is not sufficient to help you get back on the track to financial security, you will then be recommended to enroll in a debt repayment plan.

Debt management plan is also known as debt repayment plan.

When choosing a credit counseling agency, it’s important that you spend enough time researching and picking the most reputable agency.

Most important of all, look for a credit counseling and debt management agency that has satisfied clients, offers personalized service from certified counselors, educates you how to make appropriate financial choices and provides you with the tools you need to achieve financial security.

Remember, the best credit counseling service agency needs not have a big advertising campaign. Don’t be tempted to think that just because it has a big advertising campaign, it is the best.

A reputable and reliable credit counseling and debt management company normally relies on past clients for referrals rather than soliciting business through constant television ads, infomercials and telemarketing or spam e-mails.

It’s too late for me to be debt free fast with credit counseling or DIY debt management, but it’s not too late for you, right? Don’t wait until you need to enroll in a debt management program, debt settlement plan or declare bankruptcy.

“Hi, I am curious as to why you opted for a debt management program through a credit counseling and debt management agency.

Much of what a debt management company does only involves contacting your creditors and negotiating alternative repayment plans with reduced interest rates and fees that you can actually do it yourself.

Most creditors will be eager to agree with lower repayments and reduced interest rates as they don’t want you to declare bankruptcy.”

I have been asked by a few US and UK blogging pals why I enrolled in a DMP while I could actually do the debt management myself.

First off, the banks and creditors in my country are more heartless and money sucking than those banks and creditors in the US or UK.

Before I enrolled in the free debt management program, I did call up or write in asking for alternative repayment plans with lower monthly payments and reduced interest rates. Unfortunately, some didn’t bother to reply while some came back with interest rates that I considered still very high.

Most creditors agreed to reduce the finance rate from 18% per annum to 15% or 13%. The lowest interest rate was 9% per annum and it’s from a bank that I had been making my monthly credit card payment more consistently.

Guess what the creditor counselor was able to negotiate with the banks? The interest rate was reduced by many points, between 6% and 7% by most of the banks and only one bank insisted on 13%.

The low interest rate is a huge help since I had been paying 18% or more, and had also been late on more accounts. The reduced APRs can save me thousands of dollars in long run.

As for lower monthly payments, NONE of the banks wanted to reduce the monthly payment from $150 or $200 to $50 or $60 when I did the debt management myself. But when it’s the credit counseling agency that did the negotiation on behalf of me, they were willing to reduce the monthly payments.

You may think that it’s because I pay enrollment fee and a monthly service fee to the agency that it’s easier to get things done. No. Free of charge.

I am in a free debt management program and agency set up by the government to provide financial counseling and debt management to individuals as well as financial education to help individuals take control of their financial situation.

In the US, you have non-profit and for-profit debt management companies that charge initial fee and a modestly monthly fee, but in my country there is only ONE credit counseling and debt management agency and its debt management program is free of charge.

A debt management program, be it free or paid, can reduce the amount of times you have to greet your post carrier every month. Why? Well that’s easy; you will reduce the amount of creditor letters and bills in the mail.

Named literally after the concept, a debt management program takes your multiple debts and merges them so you can worry less about all the different interest rates and minimum payments being charged every month.

Instead of remembering numerous credit card payments due on different dates, you will be happy to realize that you only need to remember one payment due on one date.

You will easily find a great number of debt management program services offered by non-profit and for-profit agencies and companies that provide guidance when applying for a program that will meet all your requirements.

Before you sign up with any credit counseling and debt management agency, make sure you know all the pros and cons of the one-debt-only programs available in the market. Like credit cards, debt consolidation loans and debt settlement plans, debt management programs are also susceptible to scams.

You must always read the fine print in search of hidden fees and surprise charges that can affect your family’s livelihood. This is your responsibility and no one can be held accountable for poor judgment but the choice maker.

It’s of utmost importance that you choose a certified credit counselor that takes enough time to provide you the assistance you need and calculate your monthly expense and income rate to ensure that you will meet payments without having it reflect on your family’s daily life.

You do not want a debt management program counselor who rushes you into signing up a debt repayment plan without giving you a thorough credit counseling service or letting you ask all the questions you need in order to understand how a free debt management program works to help you.

As a credit card debt woman who started my debt reduction in 2007 but failed to make much progress in paying down my credit card debt due to high finance charges and expensive late payment and over-limit fees, debt is a smoother ride for me under a free debt management program.