Avoid debt settlement by following simple tips
While loan is essential in many instances in life, it can be a harrowing experience if you cannot repay it on time. In order to protect people who cannot repay debts, government has come out with bankruptcy laws. However, invoking bankruptcy laws can be very damaging for an individual since it may involve liquidating your assets, which you may never get back again.
One of the ways to avoid bankruptcy is debt settlement. When compared to the loss incurred due to bankruptcy filing, debt settlement is a better option. However, it has its downsides too.
Financial Advantages
Debt settlement can be a worthwhile procedure if it provides relief from loans that you cannot repay, avoid bankruptcy, save money and legal protection. In most cases involving efficient settlement agencies, all these objectives are fulfilled, in which case, the whole exercise is worth it.
Debt settlement involves negotiations with creditors so as to get them to write off a major portion of debt. Sometimes, creditors may reduce the amount to be repaid by up to 60% or more. You can be free of paying interests and being bogged down by the burden of the loan.
Emotional advantage
Further, debt settlement is a quick process. Once it is initiated, creditors are not allowed to make calls or send letters until negotiations are completed. If negotiations are successful, then you can be free of creditor harassment forever. For the peace of mind that these settlements provide alone, going in for it is worth it.
Blemish on credit report
The major drawback of debt settlement is that it shows on your credit report. It can have disastrous consequences if you want to take a loan in the future.
Loans that are disposed through settlement are marked as settled rather than repaid. This is a blemish that can make procuring any sort of financial aid in the future, including insurance and purchase of credit cards.
High agency charges
The charges that debt settlement agencies charge are very high. Moreover, you are liable to pay irrespective of the outcome of negotiation. If the outcome is not in your favor, then you lose the money that you pay as fees as well as fail to get the loan reduced.
You may have to pay either a lump sum amount or installments depending on the company. Since transactions with the creditor are through the agency, many agencies withhold payment to creditors until their fees are recovered. So, you have to select an efficient agency for your negotiations.
One of the ways to avoid bankruptcy is debt settlement. When compared to the loss incurred due to bankruptcy filing, debt settlement is a better option. However, it has its downsides too.
Financial Advantages
Debt settlement can be a worthwhile procedure if it provides relief from loans that you cannot repay, avoid bankruptcy, save money and legal protection. In most cases involving efficient settlement agencies, all these objectives are fulfilled, in which case, the whole exercise is worth it.
Debt settlement involves negotiations with creditors so as to get them to write off a major portion of debt. Sometimes, creditors may reduce the amount to be repaid by up to 60% or more. You can be free of paying interests and being bogged down by the burden of the loan.
Emotional advantage
Further, debt settlement is a quick process. Once it is initiated, creditors are not allowed to make calls or send letters until negotiations are completed. If negotiations are successful, then you can be free of creditor harassment forever. For the peace of mind that these settlements provide alone, going in for it is worth it.
Blemish on credit report
The major drawback of debt settlement is that it shows on your credit report. It can have disastrous consequences if you want to take a loan in the future.
Loans that are disposed through settlement are marked as settled rather than repaid. This is a blemish that can make procuring any sort of financial aid in the future, including insurance and purchase of credit cards.
High agency charges
The charges that debt settlement agencies charge are very high. Moreover, you are liable to pay irrespective of the outcome of negotiation. If the outcome is not in your favor, then you lose the money that you pay as fees as well as fail to get the loan reduced.
You may have to pay either a lump sum amount or installments depending on the company. Since transactions with the creditor are through the agency, many agencies withhold payment to creditors until their fees are recovered. So, you have to select an efficient agency for your negotiations.
[posted by : OFP on Sep. 20, 2011]
TAGS: debt, tips, debt settlement