Financial distress becomes one of the major problems in India. More than 75% are facing problems of financial hardship. Loans can create a trap for you and do wonders for you if you have complete knowledge about them. You need debt resolution at that time when your debt exceeds your repayment capabilities.
Debt settlement is a new concept in India but growing fast as borrowers use it to negotiate better settlement terms with lenders. It is helpful in reducing debt obligations.
Below is the required information you must need to know about how debt reduction works in India, and the risks involved with this.
How does debt relief works?
Debt relief is when you’re unable to make repayment on time for an existing loan due to any uncertain situations. In such a situation, you can do the negotiation with your creditor to settle all the debt in one payment that is less than the total amount owed by the borrower.
“It works in India only if very less money is left with you to repay debts.”
Yes it is practically possible because “recovering some amount is better than nothing”
Lenders only settle for less debt if your situation is genuine and you have proof of this.
Borrowers can also approach to debt Settlement Company to handle the negotiations on the borrower’s behalf.
These debt settlement companies reach negotiate better payment on your behalf but they charge some fees for this negotiation.
Debt resolution benefits are:-
The amount owed by the borrower is completely paid in creditor’s books.
You don’t need to pay any more interest amounts and other charges as well.
Your situation will get better in this financial distress.
Borrower’s debt is settled in lesser amounts, so they can invest future earnings in another place.
Risks associated with debt relief in India
Debt resolution in India has some risks also before trying to settle debt you need to know risk as well:-
Lenders may or may not negotiate – It is not so easy to satisfy your lenders, it depends on the creditor. There is no guarantee at all that they will negotiate with any companies or borrowers as well. To settle the debt they need strong proof.
If all debt is not settled you have to pay fees- Debt settlement companies don’t charge any fees till borrowers get debt relief. If the debt negotiator settles only a part of your debt, they can also charge some fees on this settled amount.
Negatively impacts your credit history – If you don’t make repayment on time. First it creative negative impact on your credit report. To get a loan in any worst situation you must need to maintain your credit score.
Penalties and accrued interest –If you are going for debt settlement with your creditors then may charge high interest rates for setting in less.
Settlement chances are high if much loan amount is left to pay.
Things to remember:-
If you want to reach a debt Settlement Company, first, you must check their reviews.
Note complete detail of your debt.
Don’t give any advance payments to a debt Relief Company before settling debt.
You can also visit cibil credit Repair Company to improve your credit score.