When we borrow money from banks, private lenders and other such lenders, we are under an obligation to repay the loan as per the terms and conditions stipulated. However, at times it may not be possible for us to make the payments on time because of a host of reasons. Job losses, layoffs, retrenchments and other such unexpected happenings are becoming quite common these days. This leads to situations where accounts turn bad delinquent. When this thing continues for a long period of time, there is no doubt that the lenders will have to find out other ways by which they can recover the dues from the borrowers. Hence quite often it is common for lenders and borrowers to sit across the table and come out with what is referred to as a debt settlement. This is becoming quite common and each year thousands of delinquent accounts are closed through such onetime settlements. However, it is has its own pluses and minuses and it would be worth having a look at the same over the next few lines.
The Benefits Of Such Onetime Payments And Settlements
It would be pertinent to mention that such onetime settlements could be win-win situation both for the borrowers and lenders. Borrowers could breathe easy as the monkey of a bad-debt would be off their shoulders. They will no longer be harassed by collection agents and their credit score will also be back to normal but only after a period of time. Going in for such settlements making use of free debt settlement advice would therefore be a great boon to them. From the side of the lender, they will also be satisfied that they have been able to collect their dues though the amount collected could be not very big. In many situations the collected amount could be even 50% lesser than the overall outstanding.
One of the biggest disadvantages with onetime settlement is that the borrower may have to arrange a big chunk of money in one go which may not be always possible. Though you may have managed to close the loan account through such debt settlements it certainly will damage your credit score at least for a few months of even years. It will prevent you from borrowing further till such time the report gets corrected. From the lenders’ perspective, the biggest problem is that they will end up collecting much less than what is actually due to them under the normal circumstances.