Debt settlement is a negotiation process with a bank to settle the debt for a lesser amount than what is owed to it. There are various circumstances in which a debt settlement situation can arise. Problems like financial instability, business failure, compounding debt, loss of assets, etc., are among many other reasons that can lead a person to fall into a debt trap.
If you are considering Debt settlement as an option to get rid of the debt, there are certain important things that you should keep in mind. For a smooth debt settlement, you must evaluate and analyze your current financial status.
To get a better understanding of the nuances associated with debt settlement, let’s discuss the important aspects of debt settlement in India.
Why Do Banks Agree to Debt Settlement in India?
When a lender settles the debt, the bank loses a money-minting asset. The interest charged on the debt is direct earning for the bank, and it would not like to lose the source of income under normal circumstances. However, the bank agrees to settle for less only when they find it to be in their best interest.
Let’s consider, for example, that a bank has evaluated your financial condition and concluded that you will not be able to pay your debt and will default on your loan. So, they may prefer to get something from you rather than getting nothing at all. Thus they may settle for a lesser amount and close the loan account and move on.
Additionally, taking the path of litigation is very complex, expensive and resource-draining for the bank, especially when it comes to debt settlement in India through litigation. The fees of the business lawyers and the time and resources required to follow up the settlement lawsuit may end up costing the bank more than what is owed to them. Thus it is better to settle for less and move on.
All of this implies the fact that taking the help of debt settlement services or approaching debt settlement companies is a better option for settling your debt at the earliest with the bank once you are aware of the fact that you will not be able to pay the full amount that you are owed due to your financial condition.
Types of Debts that can be Settled Using One-Time Settlement
A borrower can get any type of unsecured loan settled through debt settlement services in India. Unsecured loans like personal loans, unsecured business loans, credit card loans, and other instant loans qualify to be settled through a one-time settlement.
Experts suggest that you ideally not negotiate and settle secured loans like house loans, car loans, or gold loans. This is because banks can recover the secured loans by taking possession of the attached collateral that is mortgaged against the loan.
Benefits of Debt Settlement
There are certain benefits from settling your debts that are worth considering. Not only does it help you in coming out of the financial turmoil, but it also saves you from becoming a financial defaulter.
Here are the benefits of debt settlement in India:
1. Saves you from becoming a financial defaulter
Defaulting on your debt can have a serious impact on your financial reputation. It can end up damaging your credit score and land you in legal trouble leading to the seizure of your assets. It is best to take help from debt settlement companies like Freed to make the settlement process smooth.
2. Lowers the burden
Debt settlement can be highly beneficial. Once both parties agree, you can actually afford to pay your loan, as the settlement would reduce your payment amount by a huge margin.
3. Gets you out of a debt trap
If you fall into a debt trap, the debt amount will keep compounding and accumulate to a sum that is beyond your reach. So, it is best to opt for a debt settlement service at the earliest and settle your loan. This will help you in improving both your financial situation and mental peace.
Final Words
Opting to settle a loan on your own can be a bit tricky and may land you up in bad communication with the lender too. Therefore, it is highly recommended by the experts to opt for professional debt settlement services like Freed to make the process smooth. Only a proactive approach toward debt settlement can get you out of a bad debt scenario.
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