Debt settlement is the process through which you can get the outstanding debt amount lowered, thereby simplifying your debt pay off procedure. Settlement can be done of your own or else, you can get the help of a debt settlement company. A debt settlement company is the one which is going to help you in settling the debts, as it may not always be easy to settle debts. Some of the other very important things which you will have to keep in mind during settlement are not all creditors agree to settle, and there are various eligibility criteria for you to settle debts.
Settlement is for those who have already started missing payments on the debt accounts, which is to be settled.
Debt Settlement and Personal Finance
Debt settlement is not for one and all, as there are certain eligibility criteria. So, you will have to make sure that you are eligible for the same. Otherwise, you need to avoid settling the debts. Why is it so? That is because, those who are not eligible can find their credit rating lowered through settlement. So, debt settlement can have a negative effect on your finances.
When you or your counselor starts negotiating with the creditor on debt settlement, the first thing that the creditor will check is your account status. If the creditor finds out that there are no missed payments in your name, on that account, he may not agree to settle the debt. That is because, the concept works on the basis of the payments and if you have not yet started missing payments, it means that you still have the ability to go on making the payments.
Therefore, if you still haven’t yet started to miss the payments, it may not be possible to get the debts settled, irrespective of the financial problems you are facing. The main criteria for you to initiate a settlement is missed payments. Although debt settlement is an easier way for you to become debt free, it is not for one and all. Now, if you haven’t missed payments yet, and you still want to settle the only needful thing to do is to start missing payments. However, this must sound ridiculous to you, for which sane person would want to ding his/her credit! Yet debt pay off is actually supposed help with your credit improvement.
So, the greatest irony about settlement is that either way you are going to be in a negative position. If you do not settle, you may not have the ability to make the debt payments. On the other hand, if you settle, you will see lowered credit score. What can be done? If you are the one who haven’t yet missed payments, it would be better for you to avoid settling and rather focus on lowering instances that result in incurrence of debt. In addition, you can opt for the other debt pay off options like that of debt management and debt consolidation. On the other hand, if you are the one who have already missed payments, you can simply go on to settle the debts, for you need not fear about extra negative effect on the credit score or the personal finance standing.