Debt Articles

Advantages of Debt Settlement Plan

Debt settlement is an option worth considering when you want to escape from the clutches of the ever-mounting debt. Debt settlement offers an ideal solution to remove the debt from your credit file. The debt can not only removed from the credit report but it’s negative effects can also be removed from the credit report. However, like every other techniques of getting rid of debts, it does have positives and negative features. Hence, it is a good idea to consider the pros and cons of debt settlement.

If you consider advantages, one of the main advantages is the terms of the debt management plan are based on your ability to pay. The debt settlement plan is designed and determined after careful evaluation of your ability to pay off your debt. This helps you to organize your income, as you do not have to stretch your income. Secondly, since you agree to a specific plan of payment, they have no reason to call you to get their money back. Those infuriating calls and letters from creditors or collection agencies cannot bother you anymore.

If you have excessive debt, then you are likely to be late in your payments. Your total payable amount will include over limit fees and other late charges. By engaging in a debt settlement deal, you have chance to have your creditor waive off those extra fees and penalties. Your debt settlement plan can be designed after eliminating or reducing these charges. In addition, if your debt is associated with a high interest rate, then you may negotiate with your creditor to lower this for you.

There are some drawbacks of debt settlement. Here, main point is that you may be in debt for a longer period then agreed originally if you have not saved accordingly. Secondly, while you are making payments in the plan, you may not use your credit cards or obtain additional credit. Hence, your credit lines will be closed when you are on debt management plan.

The above drawbacks may be inconvenient at times but in a way, they do well for the debtor. Since the credit lines are closed, it will prevent the debtor from incurring any more debt. In addition, the debtor may be in debt for longer period, but will be in better position to eliminate the excessive debt. Compared to being in debt for 10 years to possibly life-long, 3 years to remove debt of enormous amount is a short period of time.

Although you establish a payment plan with creditors, there is the possibility that they will report your account as “Not Paid as Agreed,” in your credit report. This is considered as a negative entry on your credit report and it can remain on your credit report as long as seven years. This can be eliminated by having creditor convince to have the credit report entry reported as “paid as agreed”. This will help you not only to get rid of the debt but also to improve your credit ratings. Top ranking creditors are very skilled when it comes to obtaining the best option for their clients. It is also important to remember, even if you have the possibility to have negative remarks added to your credit report, if you follow a good debt negotiation program well, by the time you even have half you original debt amount paid off, you can have paid off your debt and started rebuilding your credit.

Finally, when it comes time to select your debt settlement option, you have plenty of choices available at your disposal. When you consider taking a debt settlement plan, you have to assess your needs and desires and then make a choice. Overall, you will need follow some sort of debt management plan after considering all factors affecting the debt management plan with respect to your debt problem.