debt

When a person is facing debts from many sources, then it implies that he/she has taken a substantial amount of credit from different sources and has failed to pay the borrowed sum to the credit agencies on time. All forms of borrowings have to be repaid, and nonpayment not only attracts penalties but also creates debts.

The loan sources which can turn into debts for an individual

A loan is a sum or amount of money which is taken by an individual from a lending agency. The lending market offers numerous options for allowing a person to take credit when in need. Obviously, the sum of money which is taken as a loan has to be returned. But while returning one would observe that the sum has increased. This happens due to the addition of the interest on the borrowed amount. If a person wishes to pay less interest then secured loans have to be chosen, but if the individual doesn’t want to be bothered by adding an asset in the loan document as collateral, then unsecured credit should be selected. A brief delineation of both these credit sources is given below:

  • Loan documents with collateral

Commonly known as secured loans this form of credit is only given to those people who have a suitable type of asset or property. The value of the property should be near the amount of the loan which is taken by the borrower. Hence if an asset has very low value, then it cannot be used as a guarantee for a high loan amount. Usually, property like a car or house is kept as a guarantee in loan agreements which provide the borrower with a lump sum. The rate of interest is not very high, and so the repayment will not be difficult to pay as the amount is comparatively lower. But if the borrower cannot pay the loaned amount, then the property gets seized and sold by the lending agency. This is done so that the lending agency can recoup the money which it has given to the borrower. Hence until and unless there is a sure way for paying the loan it is not suitable to opt for this kind of borrowing because there is a huge risk of losing the asset if the loan is not repaid.

  • Loan document without any collateral

These loans are readily taken by most individuals because there is no risk of collateral damage as such. The credit card companies that provide individuals credit cards with a maximum upper limit are suitable sources of unsecured loans. A credit card can be used anywhere and can also provide the individual with a cash amount. Hence individuals caneasilyacquire credit in cash through credit cards but the interest that is levied on the cash withdrawals through credit cards is quite high so the amount tobe repaid is equally high. Credit cards dues often turn into debts and once a person is surrounded by too many unsecured debts then handling repayment becomes overly difficult.

Advice on handling debts from unsecured sources can be gained from debt settlement reviews which are provided by people who have used the course of settlement for closing debt accounts. The pros and cons of the method of settlement can be understood clearly by browsing through multiple reviews.

The method of settling the debt on one’s own

When a person is having too many unsecured debts but has no financial means of income or other funds for paying the debts, then the debtor can try to persuade the lenders and lending companies to accept a settlement sum. The process of settling a debt single-handedly is not at all an easy affair and might require constant persuasion from the debtor to make the lender agree to the settlement.

In this process firstly the debtor needs to take stock of the financial situation and the number of existing debts he/she posses. The whole financial system has to be scanned for seeking out funds and avenues of income. If the situation is completely insolvent, then settlement can be acquired. In that case the all the financial documents delineating the insolvent position of the debtor should be ready. If the lender is satisfied with the explanation given by the borrower and is ready to accept the settlement amount, then the debt can be settled. However, if the lender cannot find proof of the dilapidated financial condition as claimed by the debtor, then the offer of settlement can be refused.

Things which should not be done while making a settlement claim

For a person who is having multiple debts, he/she might try to settle one or more debts by paying a certain sum which is lower than the outstanding sum. However, when a person thinks about the settlement course of debt relief the following things should be avoided at all costs:

  • Sliding the payments for seeking settlement later: Many individuals think that if they keep on defaulting then, the ending agency might be inclined to accept a settlement. But in reality, this is termed as malpractice, and no lending agency will accept such settlements. Instead penal charges may be pressed against the person for manipulating the financial records for seeking a settlement.
  • Not paying the settlement amount instantly: The amount which is quoted by the debtor as the sum which will be given to the lending agency if they agree to settle the debt has to be paid instantly. If the settlement sum is not available, then the debt won’t be closed and delaying the payment of the settlement amount might make the lender refuse the settlement.
  • False claims of financial problems: The lending agency will thoroughly check the financial record of the person before accepting any form of settlement claim and if discrepancies are found then the claim will be out rightly rejected.

Hence, before choosing settlement one should genuinely think if he/she qualifies for that form of debt relief.

Author Bio

Kelly Wilson is an experienced and skilled Business Consultant and Financial advisor in the USA.  She helps clients both personal and professional in long-term wealth building plans. During her spare time, she loves to write on Business, Finance, Marketing, Social Media. She loves to share her knowledge and Experts tips with her readers.