Once you have taken the loan, it is not guaranteed that the plan of repayment will go in your favor. There may be some loopholes or the time may continue to be tough for you, making it impossible to repay the loan on time. In such scenario, you go either for the loan for repaying loan or you may choose debt settlement route. Both have their pros and cons, and it all depends on your attitude towards handing the situation. To help you make better decision, here are some of the points that show you how debt negotiation route impact your credit score.
Settling the debt cannot work alone in improving your credit score
Settling debt, as the name explains, is arriving upon an amount lower than the due figure which loaner agrees to pay. Loan providers, who are already under stress of recovering the money, consider it as a golden opportunity to reduce the loss and therefore, agree to it. Thus, debt negotiation is actually a blotch on the credit score. But, with the passage of time and also with the arrival of some good happenings that contribute to credit improvement, settlement of debt works in favor of the borrower and his credit score.
Debt negotiation should not be preceded by late payments. Though you will come across a number of debt repayment experts to delay the payment to force the lender to agree upon settling, this should never be practiced. What happens due to late payment is that your credit score is badly hit due to your credibility going down much before the scenario of loan settlement comes into the picture.
Regular credit card due repayments after loan negotiation
You do get a chance to spring back to the game of life by sorting to debt negotiation. You are actually borrowing time and save some money to improve your condition by settling the debt. So, the next step is to rebuild the credit score. If you are a credit card holder, you can easily do so by paying next dues on the credit card on time. Moreover, you can repay timely all the loans that you succeed getting after the instance of less loan repayment. All these moves contribute to enhancing your loan eligibility in the future.
Adding to assets, in addition to regular repayment of credit card dues, is also helpful in improving the credit rating. If you make the best of the chance given to you by life the second time and improve your lifestyle, you can win the confidence of the loan companies and improve borrowing capacity in future. All the assets such as car, house or electronic equipment bought by you carry some points in the credit report making it respectable eventually.
Thus, settling debts does have disadvantage, but this situation can be turned in your favor if you follow a lifestyle improving path in the future. You should not repeat the same mistake of delaying payments if you want settlement of debt to lose its effect on your credit rating. So, spend wisely and plan intelligently!