Among the most popular solutions to the problem of a heavy debt burden is to get a full and final debt settlement figure from your creditors or to apply for a method of insolvency such as an IVA or bankruptcy. From these particular methods of debt management the option to get full and final settlement figures is much preferred as it has a massively positive effect on your credit record rather than the negative impact on credit report that would be caused by an IVA or bankruptcy. In this article we assess the benefits and possible difficulties of full and final debt settlement.
Debt settlement is a process in which an organization will go to your lenders and negotiate with them regarding your debt to organise a one of payment to settle your existing balance. The purpose of the whole exercise is to reduce your debt burden. If a settlement company is good it can get your debt reduced by as much as 40%, particularly if you have been having difficulties in making payments and your creditors are already in some doubt as to your ability to pay long term. The plan gives your creditors a guarantee of an amount of payment this is what a creditor needs and this is the most visible benefit of debt settlement as far as they are concerned.
Most people though with large debts do not have the funds to come up with this one off payment, but a good debt management company will have links to lenders who will make an advance on a debt consolidation loan. This loan should be at a good rate of interest and of course most importantly it will be for around 40% less than you originally owed. The amount of the debt is reduced; greatly the repayment plan on the new loanis made easy and the monthly instalments are spread over a period long enough for you to feel comfortable. This makes life a lot easier for you as the borrower.
However, full and final debt settlement is not without its drawbacks. There are two things to concern you. First, is the cost of debt settlement. Debt settlement companies may charge for their services. The usual range is between 10-15% of the debt amount. Paying this much amount upfront can turn your financial situation from bad to worse, however a reputable debt management company will take only a small upfront fee and the balance from the loan funds when the job is complete.
The second problem is that if you have a bad credit rating then you may not be able to borrow cheaply if at all. In this case your debt management company will have to work harder for their money, however these days there are many lenders who will advance funds for the purpose of full and final settlements even if you do have a less than perfect credit score. The very fact that you are going for a debt settlement will show positively on your report in future as all of your debts will be marked satisfied and show that you satisfied them well ahead of schedule.
Now consider the earlier alternative of an IVA or bankruptcy, and you can see that the effort to repay with one loan on reduced amounts is by far the best option, even for relatively large amounts.
The whole process of debt settlement or indeed any other form of debt management or debt consolidation becomes meaningless if you don't change your financial habits for good. The long term answer always lies within yourself and your attitudes toward your debt. With all the advantages, full and final debt settlement provides a great chance to get your finances back on track and should be used.
