If you are feeling daunted by the loan or credit card debt and having trouble making monthly payments, it is wiser to consider all the available options. While some people consider paying in full, some like to go for credit cards settlement.
Let us explore both the options individually and arrive at a meaningful conclusion.
What is Debt Settlement?
Sometimes, you have a robust plan of repaying your dues on time, but the unpredictable life may take a curve, and you have difficulty repaying your outstanding! This is a common scenario that many borrowers have experienced and suffered. Now, when you have a mounting credit card or old loan outstanding and find it challenging to repay it due to a medical emergency, job loss, or some other unavoidable circumstances, you can consider a one-time loan settlement or credit card settlement.
In the debt settlement, the debtor talks to the creditor about reducing their outstanding dues. This is the best option for those who cannot repay their balance. This proactive step prevents the debtor from getting sued by the lender and being harassed due to persistent follow-up from the lending institutions’ representatives. Debt settlement companies like Due Factory can help you negotiate with creditors and prepare a repayment plan to settle your credit card or old loan debt obligations.
What is “Paying in Full”?
“Paid in full” is a term updated on the credit report when you repay your remaining dues in one go and meet your financial obligations. Examples include paying your car loan, personal loan, student loan, and other types of secured and unsecured loans., in full. This option is the best for the people who can afford to pay the entire leftover amount in full.
Settle Debt or Pay in Full?
As mentioned, the debtor can choose their option according to their financial condition. Paying debt in full is better when the debtor can clear the dues. Paying in full will also improve your credit score. You will be able to build a stronger credit history and help you get faster loan approval. You may also qualify for loans at lower interest rates in the future. Paying in full will also give you peace of mind, and you will no longer be stressed about paying your dues monthly. However, paying in full will significantly lower your account balance. Since you repay everything you owe, along with the interest and other fees, you might be left with hardly any savings.
If you cannot make payment in full, debt settlement is the best alternative. Debt settlement programs are a faster way to get out of debt. Rather than making small payments on your entire debt over a long time, a debt settlement plan can considerably lower your outstanding and you can repay the amount quickly and easily. With the help of Due Factory, you can work out a realistic plan with us and avoid mental stress and possible legal hassles.
In an agreement when the debtor pays an amount lower than the actual outstanding, the status of the same in the credit report will be recorded ‘settled’. If the borrower pays the complete amount balance, the status on the credit report will be as marked ‘closed’.
It is important to note that debt settlement may negatively impact your credit bureau score. But you can increase your credit score gradually after credit card settlement. You can later pay off your settled bill in full and change your credit report status from ‘Settled’ to ‘Closed.’ This will create a positive impact on your credit health. Also, making regular payments is one of the most effective ways to increase your credit score. Ensuring to use less than 30% of the credit limit and continuing to keep low credit utilization also positively impacts your score. Using these ways, you can improve your credit score considerably after debt settlement. DueFactory, a credit repair company, can also suggest best ways and support you in your credit building journey.
Credit Settlement Process
If you have decided to go for debt settlement, here is how to initiate the same:
- Visit the debt settlement agency – Duefactory.com.
- Identify your bad loans or credit cards on our platform.
- Raise a settlement request explaining your inability to repay your dues in full.
- Allow the company to negotiate with the creditor on your behalf.
- Discuss repayment terms with www.dueFactory.com like payment amount, number of instalments, etc.
- Wait for the issuer to accept your credit card settlement.
- When the lender approves, it will propose a loan repayment plan and settle your loan or credit card obligations.
Wrapping Up
Start by knowing your outstanding credit amount and how much you can pay out of the total amount. Try to pay those debts first that have higher interest rates. Contact the lender and explore your debt management options in case of inability to repay the debt. Connecting with an agency that can help you with debt settlement, like Due Factory, can help you settle the debt on favorable terms and ensure financial wellbeing.
Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
FAQs
1. What is loan or credit card settlement?
Ans. Settling debt means you have negotiated with the creditor, and they have agreed to accept a lesser outstanding amount than the original amount pending.
2. When should you consider debt settlement?
Ans. Debt settlement is often the last resort for people who cannot pay their monthly loan installments and are at risk of default. Debt settlement helps you avoid legal suits or mental stress caused by persistent follow up from debt collections agencies.
3. Will settling my debt decrease my credit score?
Ans. Your credit report will have a record that your balance was repaid for a lesser amount than what you owed. It will stay in your credit history for a few years. However, the impact will decrease over time. A better payment history will increase your credit score gradually.
4. Is it better to go for debt settlement or pay your debt in full?
Ans. Considering whether to go for debt settlement or pay your debt in full depends on your financial situation. Paying in full is the best option for the people who can afford to pay the leftover amount. If you cannot make payments, debt settlement is the best alternative.
5. What kind of loans can I settle?
Ans. You can settle any loan like personal, car, home, education, business, and many other types of unsecured and secured loans. You can also do credit card settlement.
6. How is the debt settlement amount decided?
Ans. There is no set rule for the debt settlement amount. The amount you pay for the credit card or loan settlement depends on factors like outstanding balance, interest rate, negotiation with lender, vintage of the outstanding default, collateral value available with the lender, etc.
7. Should you go to a debt settlement company to settle your loan?
Ans. Debt settlement companies can help you to negotiate with the lender. They can develop an effective loan repayment plan and fetch you a lower settlement amount. Visit DueFactory.com for more details.