Advantages and Disadvantages of a Credit Settlement
Posted at by ifydcat on category CreditCredit settlement is a service available to everyone who is not capable of paying his or her debt in full. Yes, almost anyone can negotiate for a discounted amount on their loans, except of course, for those who are financially fit to settle their accounts.
A credit settlement has both its pros and cons. Being able to pay a loan at a discounted price is one obvious advantage. On the other hand, a settlement will significantly lower your credit score.
Usually, a credit settlement is offered to those who are delinquent in their payments. However, if you wish to avail of this prior to that occasion, then do so without delay. Still, your creditors will have the final say. You must convince them that you are unable to pay the upcoming amount due. Your initiative is key for this negotiation. Whatever your creditor decides will depend solely on your financial standing.
Aside from the obvious benefit of paying a substantially lower amount, a successful credit settlement agreement will surely take a load off your shoulders. You get to sleep sounder at night and you get to avoid legal lawsuits from your creditors. The creditors also benefit from this to some extent. With the recent economic crisis, plenty of people have defaulted on their loans, leaving creditors to chase after their clients and without any payments. A creditor will certainly settle for a lesser amount rather than getting nothing at all.
As mentioned earlier, one disadvantage of a credit settlement is that it harms your credit score. If your report shows that your account has been settled instead of paid, this will automatically affect your credit report negatively.
Why? Well, creditors would see someone who has a bad credit score as a risky client. They would prefer a client who can pay over someone who would avail of a discount. Depending on the amount, discount and payment terms, a credit settlement can stay in your credit report for three to seven years.
You can always speed up your credit repair with different methods like paying future loans on time, every time. Pay more than the minimum requirement each month. Do not avail of new loans as much as possible and having a significant amount of savings to your name will also help increase your credit score considerably. Know that the older your credit settlement becomes, the less impact it has to your credit report.
