Benefits of Debt Settlement to Consumers

Debt settlement is a form of transaction between a credit officer and a borrower with regard to the status of a credit balance. In this kind of transaction, a borrower will be given a chance to settle some important problems about the process of repaying a debt to the money lender. The result of the debt settlement and the arrangements will be based on the status of living of the borrower and the financial problems that serve as hindrances to the capability of the borrower to pay the remaining balance of the credit.

How to Prevent the Bankruptcy

This is always the best option for those businessmen who are suffering several burdens with the cash flow of their company. To prevent the possibilities of bankruptcy and other serious financial problems, debt settlement with the money lenders can be conducted especially if all the existing problems are out of control. In this kind of situation, a lending company together with its managers may already ask the borrower to pay lower monthly installments for the total credit to the company just to finish their contract.

Not all the time the debt settlement goes in such kind of process because it has so many kinds of alternative options to help its clients. For example, if the borrower experiences some difficulties with the process of repayment because of the high interest rates and monthly interest, the lending company may decide to decrease the monthly interests of the installments. In that way, there is a possibility that the reduced amount of monthly installments may help the borrower manage all the payments easier. But still, if the borrower fails to pay all monthly installments regularly, the balance of the debt will increase continuously together with its rate of interest.

This service is very familiar with its full and final settlement for the debt. What does this statement mean? A consumer who accepts a contract from a company offering such service becomes more protected from abusive creditors who are implementing unfair conditions and agreements in their money lending services. The company will tell its client/s not to pay the monthly installment to the creditors. All of the remaining balances of the borrower from different lending institutions will be recorded in the files of the company which will assist the person in paying all of his debts.

While clients or consumers are paying regular installments in debt settlement companies, all of the collections will be divided for all the creditors who are waiting for the repayment of the borrowed money. In each month of repayment, the creditor will receive an installment coming from the companies of their borrower and they are no longer authorized to ask for a separate payment from borrowers. In each installment payments of the client, the debt settlement company will get a certain percentage from the installment as part of their earnings. If the creditors are objecting the conditions of the settlement, the client and the debt settlement company may file a request to pay the debt less than its original amount to scare the creditors.

Relevance of Debt Settlement to Others

Debt settlement is compared to debt consolidation and debt management. However, this kind of debt service has a little difference with consolidation and management of debts. This little difference can be seen in the contents of the conditions for the borrower and the creditors that will be covered by the services of the companies that are conducting settlements for debts.

In debt consolidation and debt management, a consumer or the borrower from a lending company will be asked to pay a certain amount for their monthly installments in the process of consolidation and management of debts. These monthly installments which will be assigned to the consumer to pay their debt consolidator will be reserved for the remaining balance in other lending companies. The regular installment to the debt consolidator will be divided into two different payments. Some amounts of the installment will be taken by the consolidator as the fee of the borrower for their debt consolidation service and the rest will be given to the creditors as payment for the remaining balances of their clients. This process will continue until such time that the client has already completed and paid all the balances of debts in different lending companies. The clients will no longer be pressured by the creditors because the debt consolidator will do all the requirements and payments for them as long as they pay the monthly installments regularly.

How to Protect From Usury

Those are only for debt consolidation and management and to be honest, the so called debt settlement is also practicing such kind of services, but its conditions are focused on one hundred percent protection of the borrower from usury. The companies of this service are accepting clients who are already suffering from their uncontrolled financial problems caused by the several debts in lending companies. The companies also ask its clients to pay a certain amount for the monthly installments. These monthly installments will be divided into two parts. Some of it will be taken by the debt settlement company as payment for the legal services and the remaining amounts will be distributed to the lending companies where the client have other remaining balances to pay.

Debt settlement service is not limited to monthly installments. Sometimes, if the financial problem of the borrower is already impossible to resolve, the company may file a request to all creditors and lending companies that will ask for the approval of a full and final settlement of all the remaining balances of their clients. The result of the debt settlement in this case will be based on the welfare of the client. The settlement company will ask its clients to pay only fifty percent or lower from the original remaining balances in lending companies as their final arrangement and payment for all the creditors to end their contracts and repayment activities. This kind of transaction happens only when the client is honest and follows all legal transactions for their debt problems.