When you borrow money from banks and financial institutions, you undertake to pay the borrowed amount with interest. It is an agreement which is legally enforceable. While in 9 out of 10 cases most of us would be able to repay the loans, there could be situations where it may not be possible to repay the debt on the various due dates. When this happens, the borrowers are supposed to have defaulted and their accounts become delinquent. However, since this is business dealing between two entities, lenders and borrowers, there is lot of flexibility and room for working out things with mutual agreement. This is what debt settlement is all about and it would be interesting to know more about it over the next few lines. Understanding the various techniques of settling debts could help borrowers to save around 50 to 70% of the debts which certainly is great news.
What Are The Basics Of Debt Settlement
Put in plain and simple words, when we talk about settling a debt, we refer to an agreement by which the borrower makes a onetime payment and settles the account totally. For example, it could be a situation whereby a person who owes $10K on his credit card could enter into a onetime settlement agreement by which he could close the account by paying just around $6K. Hence he will be saving a smart 40% of his credit card outstanding amount which is superb to say the least.
Why Do Lenders Offer This Option
There are many reasons why banks, financial institutions and other lenders exercise this option of onetime debt settlement. The lenders (especially private parties) may be strapped for cash and would like to pool in as much money from defaulters as possible. Secondly, the lenders may also try and preempt a situation where the borrower could land himself in a situation where he may not be able to pay anything at all. Hence it is a win-win situation both for the borrower and the lender provided the right debt settlement advice is taken. This is all the more true for unsecured loans where there are no collaterals or securities to fall back upon.
While all this is good, as a borrower the onus should be on you to take the first step and approach the bank or lender expressing your intention to settle the accounts. Lenders usually do not advice such onetime settlements and as a borrower you have to move out of the way to get things settled.