Incurring more debts than you can actually ruin your personal finances. In such a situation, you will obviously be looking for viable ways to pay up such outstanding dues. After all,the last thing you want is to declare yourself bankrupt. It can adversely affect your reputation in the marketplace in the way you could never imagine. This is where debt settlement comes into the picture. It refers to a strategy you adopt to repay the amount of money you owe your creditors. You generally enter into negotiations with them to write off a small percent of youroutstanding balance. If they agree to your terms, you only pay a partial sum as a full and final settlement.
What do you need to be aware of if you opt for a debt settlement scheme?
Prominent finance experts say you should consider debt settlement only as a last option. You should make it a point to repay your outstanding dues on time. However,if you do opt for this course of actionwith your creditors, you should read the agreement thoroughly. This is the safeguard you from potential scams which have been occurring in recent years. Fortunately, they do admit that it is a convenient way for you to clear your entire dues. You only pay a certain percentage of the sum you owe your creditors. Such lenders generally agree to such proposals as they normally receive a substantial amount of money. It is a better option to write off your entire dues as irrecoverable.
You need to realize it is not possible for you to clear all your outstanding dues via debt settlement. Only those who fall under the category of unsecured debts. This means that if you took a loan by mortgaging your house, you got to repay the full amount. Credit card debts are the most common form of dues you can clear via this repayment method.
Benefits of this repayments scheme
Such professionalsexplain the following four important benefits you can enjoy by opting for debt settlement scheme to clear your dues:
- Avoiding bankruptcy at all costs
This is perhaps the most important reason which compels people to opt for viable debt settlement schemes. You have to understand that bankruptcy is a solution which can help you clear your outstanding dues. However, you have to pay a heavy price for opting for this course of action. The consequence of your decision will stay with you for a long time to come. It leaves an indelible mark on your creditworthiness for the next ten years. This makes it virtually impossible for you to obtain any personal, auto or housing loanduring this period. If you try to conceal this fact, you can hold guilty of committing fraud. This is something most people try to avoid at all costs.
Arriving at an agreement to clear your debts with your creditors via debt settlement is a better option. It prevents you from falling into the trap of filing for bankruptcy and facing the consequences. Moreover, it just remains on your creditworthiness report for only seven years without having any adverse effect.
- Relief from the burden of accumulating due debts
You shouldn’t consider debt settlement to be a means of getting rid of your creditors. It is unwise on your part to accumulate such a huge credit card debt in the first place. After all,they are just asking you to pay back what you owe them in the shortest possible time.This repayment strategy allows you to do this.It offers you a legitimate way to repay a fraction of the amount you owe them. They eventually write off the remaining portion which is normally negligible. Once you come to an agreement with such lender, it does take you very long to pay the amount you owe them. Normally, it is cheaper than repaying the entire due traditionally. Your creditors recognize this factor. They are also aware that they are hardly going to get anything from your estate if you file for bankruptcy. This makes it a win-win situation for everyone.
- Opportunity to clear your outstanding dues in the shortest time period
If you agree to a viable debt settlement scheme with your creditors, you can pay off your outstanding dues within less than four years. This faster than if you opt to pay back your debts in the normal way. In some case, it can take you decades if you stick to the former repayment scheme. This can lift a heavy burden from your mind. Even other settlement programs such as debt consolidation or credit counseling take a longer period.
- Saves money
At the end of the debt settlement schemes enable you to save plenty of money. The longer your dues remain outstanding, the more interest payments you accumulate. This is something you want to avoid at all costs. In many cases, people who opt for such programs just repay 75% of the amount they owe their creditors. Such lenders are generally happy to receive such sums rather than nothing at all. This is why they have no objection to writing off the balance amount. Moreover, you can easily channelize this money to your savings.
Most people desire to be free from outstanding debts. You also fall in the same category. Such a situation reduces the burden on your personal finances in the long-run. Moreover, it has a positive effect onyour reputation in the market. However, it is never easy for you to achieve this objective. Fortunately, taking the initiative to opt for debt settlement programs schemes can help you find a way out. You just need to look at the above four advantages to knowing that this is the right option to take. However, you should not opt to take a new loan or credit line until the entire process is over. This ensures you don’t fall back into the trap of accumulating debts. You have got to remember this repayment programgives you a fresh start to reorganize their finances properly. This helpsyou to get on with your life.